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Posted By: Tripti Rijhwani
Sales & Marketing

Buy Now Pay Later (BNPL) has become the go-to payment option for consumers looking for a convenient, interest-free way to purchase products. BNPL is a loan offered to customers at the point of sale (in-store and online) to purchase merchandise without a credit card. Popular BNPL options include Shop Pay Installments from Shopify, Affirm, Afterpay, Sezzle, PayPal, and Klarna.

This payment option has become increasingly popular across generations, as nearly 60% of consumers prefer it over credit cards due to the ease of set payments, the simple approval process, and the lack of interest charges, according to a PYMNTS survey. Consumers primarily use BNPL, but these options are now emerging on B2B marketplaces as well.

Typically, the online merchant must pay a fee to the payment partner to assume the transaction's risk. This fee is usually a small percentage of the total purchase, allowing the buyer to purchase the product without interest or late fees. In return, the payment partner can offer the buyer a more flexible repayment plan. BNPL is an attractive option for buyers looking for a convenient and cost-effective way to purchase products.

Win-win for consumers and merchants alike BNPL is a revolutionary new payment method that provides customers and merchants with several benefits. Customers benefit from the convenience of paying for their purchases in installments, while merchants benefit from increased sales and conversion rates. This payment method helps simplify shoppers' purchase decisions and reduces cart abandonment rates, resulting in higher conversion rates for merchants.

The BNPL payment method has been a great success and has been credited for increasing revenue and the number of orders on Black Friday 2022 by 72% and 68%, respectively according to RetailDive. Furthermore, it has been reported that the number of items per order increased by 10% year-over-year from November 25 to 27. This payment method has created significant value for customers and merchants, making it an excellent choice for online shoppers and merchants.

The Hidden Risks of BNPL Solutions

BNPL payment solutions are becoming increasingly popular but come with hidden risks. Consumers may find themselves with unsustainable debt and damage to their credit scores so they need to manage their BNPL loans properly. Merchants and payment solution providers should also be aware of the risks associated with BNPL solutions, as they can lead to losses if not monitored. As this payment method continues to grow in usage, there needs to be more information about how often people use it and how it impacts consumer credit.

Unsustainable debt is one of the most significant risks associated with BNPL loans. The ease of taking out a BNPL loan may lead consumers to take out too many loans at once and accrue more debt than they can repay. Taking out BNPL loans regularly for an extended period could also cause financial stress.

Credit score damage is another risk associated with BNPL solutions. Credit bureaus like Equifax are beginning to incorporate BNPL data into credit reports. That could be a good thing for many (a track record of on-time payments will boost your credit score), but it also means a late BNPL payment could hurt your score and make it more difficult and more expensive to borrow down the line. Lack of consumer protection is also a risk associated with BNPL solutions.

BNPL loans are a very recent innovation. Regulations surrounding these products aren't as robust, and consumers have fewer protections when something goes wrong. It can be more challenging to settle disputes or return products purchased with a BNPL loan than those purchased with a credit card.

The best way to manage these risks is for consumers to use BNPL loans when necessary and to pay them off as soon as possible. Merchants and payment solution providers should also be aware of the potential for losses and monitor their BNPL solutions to ensure they are being used responsibly.

Unlock Your Ecommerce Growth BNPL is a powerful tool for eCommerce merchants to unlock growth. BNPL allows for more sales and a larger basket size when customers can spread out the payments over time.

To make a BNPL solution successful, merchants must implement the correct solution, inform consumers early in their purchase journey, offer an omnichannel experience, evaluate approval rates, and go after abandoned carts. DreamingCode has experience implementing BNPL and can help guide merchants through the selection of the right partner, implementation, and ongoing management of the solution with Radical Support.

A successful BNPL solution can help merchants increase their conversion rates, grow their customer base, and ultimately increase their revenue. BNPL also helps brands build trust and credibility with their customers and create loyal customers who are more likely to continue shopping with their favorite brands.

If you are an eCommerce brand and have questions about Buy Now Pay Later and how it could impact you, feel free to contact us to set up a consultation with us today. Unlock your eCommerce growth and learn how to launch BNPL with DreamingCode.

To learn more about how we can help your business, schedule an appointment with one of our solution experts today.

To learn more about the Dreaming code eCommerce platform visit: http://dreamingcode.com.


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