Buy Now Pay Later is all the rage these days, but if you're not sure what it means, let me explain it to you.
So, basically Buy Now Pay Later is exactly what it says it is! You buy now and then pay later!
There are many forms of payment but the most common ones I’ve seen are broken down into 3 maybe even 6 months without interest! Now, do you see why this is gaining popularity? Unlike credit cards, you’re not required to pay any interest.
Due to this, this has become a preferred form of payment for many consumers because they’re only paying a certain amount upfront.
For example:
Let’s say the product I’m buying is $150.
This will be broken down into a 3-month payment plan:
1st month: $50
2nd month: $50
3rd month: $50
So, in my head, I can afford it because I’m only paying $50 upfront! (Girl Math)
As a business owner, it’s high time you start applying this strategy. Recent stats reveal that 60% of people are using Buy Now, Pay Later options. So, if you haven’t already adapted to this, you could be losing out on a huge chunk of your consumers!
Is Your Target Audience Using Buy Now Pay Later?
Buy Now, Pay Later (BNPL) services have mainly targeted younger generations, like Millennials and Generation Z. According to BigCommerce, a Forbes study found that BNPL usage has surged among Gen Z, growing by 600% since 2019, and more than tripling among Millennials.
Although Gen X and Baby Boomers are catching up, the rapid growth of BNPL among the younger crowd suggests that in the future, it might become the go-to way to pay, rather than just an option on the side.
Why Are People Choosing Buy Now, Pay Later?
Money's Tighter These Days
With everything getting more expensive but our paychecks staying the same (or even getting stuck), people just don't have the means to spend like they used to. With the world feeling less stable and the gap between rich and poor getting wider, it's harder for regular consumers like you and me to splurge or sometimes even afford basic necessities.
Buy Now, Pay Later lets people stretch their budget, using a system they have been implementing for big purchases like cars or houses, now for everyday items like clothing or furnishings. Other examples could include electronics, appliances, home decor, and even groceries. It's just a way people are coping with the rising cost of living.
Convenient
Buy Now, Pay Later options are incredibly convenient: You can buy things even when your bank account is low, without needing to wait for your next paycheck or relying on credit cards. Shopping now and paying later has never been easier.
With services like Clearpay, you just sign up and split your payment into four smaller ones, spread out every couple of weeks.
Life can throw curveballs anytime - like a breakup, losing your job, or dealing with theft or disasters at home. It's unpredictable. Having the option to Buy Now, Pay Later can be a real help for those who don't have cash upfront or a perfect credit score. It's a way to manage your finances and handle unexpected expenses.
Better Than Using Credit Cards
Many people are fed up with constantly being in debt with credit cards. BNPL offers a way out of that cycle by getting rid of the interest rates that credit cards slap on, while still letting you buy items you can't afford upfront.
Instead of piling up debt, flexible payments give people some peace of mind.
Now, you must be wondering how BNPL companies make money. Are there any hidden fees? Well, sometimes they slightly bump up the prices of items for everyone to make a profit.
For example, something that would normally cost $150 might be listed at $160. Whether you pay all at once or over time doesn't change the total amount you pay, but going with BNPL still earns the company a profit.
In the end, consumers know exactly what they're paying overall, and BNPL feels like a safer bet compared to credit cards. It seems like a good way to handle finances without the risks of credit cards.
How Does Buy Now Pay Later Benefit Marketers?
Increased Revenue & AOV
BNPL payment methods boost sales and increase the average amount customers spend per order (AOV).
Why? Because offering BNPL makes it easier for people to buy things they want without worrying about paying a lump sum upfront.
Most people abandon their shopping carts when they can't use BNPL, so having this option helps keep them shopping. According to a survey by Cardify.ai, 48% of people said they end up spending 10% to 20% more when they use BNPL compared to using a credit card.
Not only that, in a Klarna's study, some brands could make their AOV go up by as much as 33% just by offering BNPL payment options. That's a big deal! It means the brand can make more money from the same number of orders.
When AOV goes up, it means brands get more value out of their marketing and spending, which is great for their bottom line.
Provides a Better Shopping Experience
Millennials and Gen Z are known for their love of shopping and browsing. However, they especially appreciate quick and easy transactions. To win over and retain these younger customers, your platform needs to be nothing short of exceptional. That means jumping on the Buy Now Pay Later bandwagon.
So, before diving into reward programs or loyalty schemes, I think you should ensure that your platform meets the high expectations of these generations. When you focus on delivering an outstanding shopping experience from start to finish, you'll be better positioned to attract and keep their business in the long run.
Your Ticket to Staying Ahead
With more and more online businesses jumping on the BNPL bandwagon, you need to keep up to maintain your competitive edge. Just like water naturally flows down the easiest path, people tend to go for the simplest shopping experience.
If your competitors are making it easy for customers to shop with BNPL, they might ditch you for them. Hence, giving customers different payment choices is key. As mentioned at the beginning of this article, falling behind on new payment methods could mean losing your online business.
How to Pick a Buy Now, Pay Later Service?
Now that we've established how important the BNPL strategy is, let's talk about picking the right service! Choosing the right buy now, pay later service depends on what you sell, how much it costs, and who your customers are. Here's what to think about:
Payment Plans
Different buy now, pay later services offer different ways for customers to pay back what they owe. Some allow them to pay over the course of a few weeks, while others give them years.
If your products are expensive, you might want a service where customers can pay a small amount each month for several months. But if your products are more affordable, you can go for a service where they pay back in just a few weeks.
Credit Limits
Each customer will have a different spending limit based on how they use the service, their credit score, and how they've paid back money in the past.
Buy now, pay later companies set a minimum and maximum amount that customers can spend. Learn how much your customers typically spend and choose a provider that gives them enough credit to buy what they want so you don’t have any issues in the future.
Customer Location
Choose your buy now, pay later options based on where your customers are located. This might mean using more than one provider to reach a broader geographic area. I recommend selecting the most widely used buy now, pay later service in each region.
So, Is Buy Now, Pay Later Right for Your Business?
Buy now, pay later options can be useful for most businesses, especially:
Stores that sell expensive items or services, like high-end electronics or designer clothing. It can help convince more people to buy.
Stores that want to sell more or increase their AOV, reaching customers who can't pay everything at once or don't have credit cards.
But, it might not work for your business if:
Your customers are other businesses. Buy now, pay later options are only for regular shoppers, not businesses.
Your business depends on subscriptions or repeat purchases. Right now, buy now, pay later doesn't handle things like setting up regular payments or sending invoices.
Final Words
In conclusion, Buy Now, Pay Later (BNPL) is changing how we buy and sell things. It's a win-win for both businesses and shoppers, making purchases easier and more flexible.
For businesses, offering BNPL can mean boosting sales and providing customers with a better shopping experience.
With that being said, it's important to choose the right BNPL service and consider what works best for your business and customers.
While BNPL may not be the right fit for every business, it's definitely worth exploring as part of your business strategy.
SO, WHERE DO YOU FIND THIS PARTNER?
Well, aren’t we glad you asked! We at DigiCom are obsessive data-driven marketers pulling from multi-disciplinary strategies to unlock scale. We buy media across all platforms and placements and provide creative solutions alongside content creation, and conversion rate optimizations. We pride ourselves on your successes and will stop at nothing to help you grow.
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