As the name suggests, the term Buy Now, Pay Later refers to an individual purchasing something, but they will not have to pay immediately. Instead, you spread the amount over a certain period to complete the payment in equal monthly instalments.
BNPL is like a loan, but it is far much better because there are no interest charges. However, that only applies if you make all your instalments on time. For instance, if you delay or default your payments, you will have to pay a fine, and the amount will vary depending on the scenario.
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There are five parties involved in a BNPL transaction:
- The buyer who is your customer
- The merchant (you)
- The issuing bank/customers pay later account
- Acquiring/ merchant bank
- The payment gateway and processor
Below is the BNPL transaction process step by step:
- Your customer picks an item then chooses the BNPL mode of payment at your POS billing machine.
- Payment gateway takes their information, encrypts it, and sends it to the payment processor.
- The payment processor launches a request to the issuing bank.
- Issuer confirms the information, i.e., whether a pay later account is eligible.
- The issuer responds, depending on the confirmation, yes for approval and no for denial.
- If the transaction goes through, the payment processor notifies you and requests your merchant bank/the acquirer to credit your account.
- The issuer/customer bank sends the funds to your merchant bank into your account.
- The payment reflects.
Are you planning to provide BNPL payment services in your business? Here is how BNPL can benefit your business:
Zero Credit Risk
With BNPL, the customer buys from you on loan, but the loan does not come from you. An issuer sends the whole purchase amount to the merchant account bearing the credit risk. Once the transaction completes, nothing else should worry you. If the customer delays or defaults, that’s up to them and their issuing bank.
Encourage Impulse Buying
BNPL makes it easier to spend, so eligible customers are more likely to engage in unplanned purchases. Impulse purchases directly impact sales, and the more customers act on such an impulse, the higher the sales you make.
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Better Customer Relationships
Another advantage of providing BNPL services in your business is the trust you get from your customers. Any customer in the market has a need they intend to satisfy. The work of a merchant is to understand that need and provide the necessary solution. When customers get what they want, they become happy. Eventually, you earn their trust and loyalty.
Free Marketing Campaign for Your Business
Did you know loyal customers make the best marketers and that word of mouth is the most effective marketing mode?
Your loyal customers will tell others about your services and even encourage them to visit your store. That will help attract more customers to increase your conversion rate.
Build Trust and Reliability
Before, getting a trial period was impossible for most consumer products. If a customer wanted to try something new, they had to own it and risk losing their money if they did not like what they found. But things are different now.
Today, thanks to BNPL, customers can test your products without risking their hard-earned cash. They only pay for what they like and return what they don’t.
Accepting returns creates an impression that you are confident about your products stimulating trust and reliability in your business.
Minimise Cart Abandonments
Cart abandonments occur due to:
- Lack of options to pay
- Complicated checkouts at POS billing machine
- Untrustworthy websites
BNPL can help minimise these cart abandonments because it is fast, more secure, and less complicated.
Facilitate Growth in Your Business
Your competitors may have BNPL already. If not, you can bet that their plans to implement it are underway. If a potential customer cannot get the ideal satisfaction, you may lose them to your competitors. With BNPL, you can prevent that from happening to ensure customer satisfaction, maximising your benefits and business growth.
Conclusion
To facilitate seamless and multiple transactions in your business, you need to accept several payment methods. It is advisable to ensure that BNPL is one of them to guarantee your success.