25 May 2023
Vishnudev T V
Traditional credit cards and store-specific credit cards are used to rule the ‘Buy Now Pay Later’ (BNPL) scene. But now, there's a game-changer in town: modern BNPL. This innovative mode of payment solely relies on your credit scores and purchase history, transforming the way you shop and manage credit payments online. It's like a personalized loan based on your credit history, brought to you by BNPL providers. Say goodbye to credit limits and hello to flexible payments that fit your budget.
In the realm of eCommerce, BNPL is like a bridge that connects your dreams with reality. By leveraging your credit history and joining forces with innovative BNPL providers, it empowers you to make those dream purchases with ease and convenience.
The rise of modern BNPL is transforming the way we approach credit payments in online shopping. It's a game-changer that offers unparalleled flexibility, making shopping a delightful experience while keeping your financial well-being in mind. So, go ahead and dive into the world of BNPL—where your dreams become possibilities!
BNPL, or Buy Now Pay Later, works by allowing customers to make purchases and pay for them in installments over time. It offers an alternative to traditional credit cards and upfront payments.
Here's how it typically works: When making a purchase, customers select the BNPL option at the checkout. They are then provided with the option to split their total cost into several smaller payments, often interest-free. These payments are usually made over a fixed period, such as weekly or monthly installments.
To qualify for BNPL, customers' creditworthiness is assessed based on their credit scores and purchase history. BNPL providers work with credit score agencies to evaluate customers' financial reliability and determine their eligibility for this payment option. By leveraging this information, BNPL providers offer a more personalized and flexible way for customers to manage their payments, making it easier for them to afford their desired purchases without the burden of immediate full payment.
BNPL provides multiple ways to repay the loan/purchase amount credited to the customers. They can pay in full before the due date, pay in installments, or set up automatic payments. Some BNPL providers allow their customers to make extra payments to pay off the balance faster and reduce the total interest charges, while some providers encourage customers to consolidate multiple BNPL balances into one loan or credit card with a lower interest rate.
Historically, the target market for BNPL has been the younger generations, Millennials, and Generation Z. According to a study by Forbes, the growth of BNPL among Gen Z has grown 600% since 2019, while the rate for Millenials has more than tripled.
While Gen X and Baby Boomer adoptions aren’t too far behind, the growth of BNPL among the younger generations points to a future where BNPL no longer exists as an alternative payment method but as the primary one.
Imagine this: retailers are eager to receive immediate payment, even if their customers prefer to spread out the cost. That's where the superpowers of BNPL suppliers like Klarna, Affirm, and Sezzle come into play. These fantastic providers instantly transfer funds to retailers as soon as a customer makes a purchase, ensuring a win-win situation for both parties.
Now, let's talk about the unstoppable force of Millennials and Gen Z. These trendsetters are spending a whopping $600 billion annually, with a significant chunk being spent online. In fact, their online purchases have surged from 47% to a staggering 60% in just two years. Brace yourself for the future because by 2030, this powerhouse duo is projected to account for 35% of daily consumer spending per person. Oh, and here's a mind-blowing fact: two-thirds of them don't even own a traditional credit card and have no interest in it!
But wait, there's more! BNPL doesn't just boost retailer revenue; it unleashes a whirlwind of benefits. The flexibility of payment options has been shown to increase the average order value by a jaw-dropping 45%. That means customers are more inclined to splurge a little extra when they have the freedom to pay in installments. And guess what? It gets even better. With a 35% increase in checkout conversions, BNPL helps combat the dreaded cart abandonment rates that often hover around a staggering 70%. That's no small feat!
But that's not all. BNPL is here to save the day when it comes to returns. With an average return rate of just 5.4%, it triumphs over the industry average of 20%. This means retailers can breathe a sigh of relief and focus on growth rather than dealing with a mountain of returned merchandise.
Don't just take our word for it. Klarna, the reigning champion of BNPL, conducted a survey that revealed some fascinating insights. A whopping 36% of consumers said that flexible payment options would entice them to shop again with a brand. And if that's not impressive enough, 27% claimed that flexible payment options would make them more likely to splurge and spend even more with a brand they love.
Though most BNPL transactions are with online retailers, traditional brick-and-mortar retailers can also offer BNPL payment plans. This option usually involves the customer generating a QR code within their BNPL app, which is then scanned at the point of sale. The retailer gets the credit and the customer gets to pay later.
Choosing how and when they pay — without accruing interest — can increase spending power and allow customers to determine their financial schedules.
Integrating BNPL gateways into eCommerce platforms is crucial for a seamless shopping experience, eliminating any hurdles in the payment process. It ensures that customers can easily access and utilize BNPL options during checkout, enhancing their convenience. By streamlining the integration, businesses can provide a user-friendly and frictionless shopping journey, maximizing customer satisfaction.
To ensure the smooth integration of BNPL gateways into an eCommerce platform, merchants should follow a few essential steps.
Firstly, they need to research and select a reliable BNPL provider that aligns with their business requirements and customer base. It's crucial to choose a provider that offers robust integration options and technical support.
Secondly, merchants should work closely with their eCommerce platform provider or development team to integrate the BNPL gateway seamlessly. This involves implementing the necessary APIs or plugins, configuring settings, and conducting thorough testing to ensure compatibility and functionality.
Lastly, ongoing monitoring and communication with the BNPL provider are essential. Merchants should stay updated on any updates or changes to the integration, collaborate with the provider to address any issues promptly, and continuously optimize the checkout experience for smooth BNPL transactions.
Mozanta, who engineered ShopSphere, backed by a decade of eCommerce technology expertise, offers invaluable advice and assistance to online providers looking to integrate their online shops with payment providers, including BNPL. Their top-notch eCommerce services ensure a smooth integration and hassle-free maintenance of payment gateways, leveraging Mozanta's technical prowess and extensive domain experience.