Providing customers with the opportunity to defer payment to a later date can be beneficial for the business doing the selling. And, thanks to a raft of online services and open banking platforms, there’s more opportunity to offer customers with the chance to buy now, and pay later (or, if you prefer, to BNPL).
So why might a business consider doing so? And why might it think twice? Read on to know more about the pros and cons of BNPL schemes:
Higher Conversion Rates
BNPL services tend to produce higher rates of conversion. Customers who might otherwise have lacked the means to pay for something will have an additional opportunity to get the cash to hand, and will therefore be more disposed to make a purchase. Once a customer has abandoned a purchase, it can be difficult to lure them back; BNPL schemes address this problem.
Keeping Pace with Competition
BNPL is something that isn’t going away any time soon. According to research by Business Insider, the industry is on course to exceed $680 billion in transaction volume by the middle of the decade. Businesses which don’t offer customers a means of paying digitally put themselves at a disadvantage today, and the same may well be true of those which fail to offer BNPL in a few year’s time.
This is something which doesn’t just affect customers who wish to use BNPL – it can also reflect poorly on the brand more broadly, leading to reputational damage. By getting on board with BNPL at an early stage, on the other hand, businesses can attract new customers who might not have been able to make purchases before.
While it now seems almost inevitable that the future of shopping will involve some kind of BNPL service, there remain a few drawbacks to consider.
1. False Consumer Data
By its very nature, BNPL tends to draw in customers with poor financial habits, who are more likely in the long run to default on the loan. This creates a problem for the business, which needs to then spend money in order to get the debt honoured.
One way to get around this is to have a third-party system pay you directly, leaving the collection of debts entirely out of your hands. Another option is to insure yourself against this sort of loss.
BNPL services will usually charge you a percentage fee on every transaction, which will eat into your bottom line. Shop around and see what the best rates are, but don’t let that percentage figure be the only thing that informs your decision.