Digital payments have been around for quite a while now and their popularity has been increasing from the moment they were introduced. That was the case even before the pandemic and you can also guess how many more consumers are now looking for flexible payment methods that provide seamless checkouts, both online and in-store.
Needless to say, with the rise of digital payments, consumers are turning more and more to buy now, pay later (BNPL) options, finding it key to fueling online shopping. What’s more, it turns out that more money is now spent per purchase, partly due to the fact that BNPL options are available.
What is it?
As the name suggests, “buy now, pay later” allows consumers to buy a product and have it delivered while delaying payment until a later date. This is in a way similar to the old-school layaway method, in which stores let consumers reserve an item while paying it off in installments. Once all payments were made, they’d be able to take the item home.
BNPL is even more consumer-friendly since there is no need to wait to use the item until it’s paid off in full. Basically, the only waiting involved is the one that is needed for a product to reach your doorstep.
What kind of purchases are made using this method?
While layaways were used almost exclusively for expensive purchases, BNPL is actually used for a wide range of products, from clothes and homeware to bit-ticket items like fitness equipment, though it’s also popular among those making expensive purchases.
What is the underlying principle?
There are various options for buying now and paying later out there, but they generally offer the same thing. The consumer is allowed to make repayments over several installments (normally between two and four) or in full within two to four weeks, though there are some cards, such as the humm90 interest free credit card in Australia, which allow for up to 110 interest-free days to pay. Naturally, failing to pay will result in a fee, but that too doesn’t have to be the case. So, if you’re interested in this option, make sure you are well familiar with all terms and conditions.
Why is this option so popular among customers?
To begin with, BNPL options offer consumers an easier way to access credit. Unlike credit cards, which require users to hand over a lot of information and pass a rigorous credit check, BNPL providers just need your name, e-mail address, date of birth, and billing address. Also, these options mirror the purchasing habits of young consumers who are more likely to buy a selection of items, try them out and return those they don’t want. Returns are more manageable and less stressful using a BNPL solution because consumers don’t pay for the product in the first place.
Why is it popular among shop owners?
Many stores like this option because it can potentially increase sales, since when you allow consumers to spread out payments, they may be more likely to make a purchase, and because it allows consumers to buy something pricey they otherwise wouldn’t when they can split the payment into manageable chunks. Also, a BNPL option may entice new customers, who might even have the cash in their banks, but would prefer to spread the payments out when they aren’t charged interest.
What about user experience?
We all know how important user experience is in today’s world. BNPL makes the checkout process much smoother. Customers appreciate the fact that they don’t have to enter card details or a billing address, but simply log in with their account. This is important because almost a third of the customers who abandon their carts do so because they don’t want to create an account, while almost one-fifth don’t trust the sites with their information.
What does the future hold?
The success of BNPL means that banks and financial institutions simply have to strike while the iron is hot. Since many others have already accepted BNPL functionalities, skipping out on including it would leave an institution scrambling to play catch up in the very near future. That’s why these groups need to take advantage of what is available to them now.
From the consumer perspective, we can expect to see the BNPL space become very crowded. Currently, there is little brand loyalty and tons of new entrants vying for share. That leaves financial institutions uniquely positioned to leverage their brand loyalty to win the BNPL space, but they will need to react promptly and efficiently.
In conclusion, it’s easy to predict that BNPL options will become even more popular in the future since they bring benefits to all parties involved. What’s more, we can expect the conditions to become even more favorable once more institutions accept this method, since they would all need to gain some advantage over competitors and that can only be good news for customers.