It may feel like BNPL has been around forever, but Buy Now Pay Later services only gained major traction in the 2020s, revolutionizing the way consumers make large purchases and providing new opportunities for businesses.
Let’s explore the concept of Buy Now Pay Later and go over its benefits for both consumers and businesses. From better margins for the business owner to increased customer satisfaction, this payment model has proven to be a game-changer for product and services providers worldwide. And it’s just getting started.
But first, wanted to check if you (or your staff) would like to get the ultimate BNPL automation white paper for B2C and B2B companies?
What is Buy Now Pay Later?
Buy Now Pay Later is payment model that lets consumers to pay for a product or a service in installments over time and get the purchase upfront. This simple credit product eliminates the need for immediate full payment and provides flexibility to consumers. On the other hand, business owners who offer Buy Now Pay Later improve their margins, customer loyalty, and overcome income seasonality.
What is Buy Now Pay Later?
Buy Now Pay Later is a payment model that lets consumers pay for a product or a service in installments over time and get the purchase upfront. This simple credit product eliminates the need for immediate full payment and provides flexibility to consumers. On the other hand, business owners who offer Buy Now Pay Later improve their margins, customer loyalty, and overcome income seasonality.
How does Buy Now Pay Later work?
Both product and service providers can offer Buy Now Pay Later payment options. To implement it into your business, you will need to decide between the two common options.
- Running the program in-house to control the customer’s lifecycle, BNPL terms and approvals. This is what TurnKey Pay Later platform lets you do.
- Partnering with financing providers like Affirm, Klarna or specialized lenders to fully delegate BNPL to a third-party and receive the full purchase sum at once.
Once your BNPL solution is in-place, the client selects this payment option at the checkout and splits their purchase amount into smaller payments, usually charged automatically bi-weekly or monthly until repayment.
Businesses that use third-party financing providers have little control over the financing terms and whether the client will be approved. And after the purchase is complete, the business owner loses control over customer relations.
To be able to create new BNPL campaigns and offer accessible terms tailored to your clients, you’d need to run your Buy Now Pay Later operation in-house. Which is what we specialize in.
Here is a demo of what your own pay later operation may look like with the TurnKey Lender Platform.
Benefits of Buy Now Pay Later for consumers
With the rise of BNPL finance providers like Affirm or Klarna and heavyhitters like PayPal and Apple entering the arena, it is evident that customers want and use these services.
Lower interest rates
One of the key benefits for consumers is the availability of zero-interest installment plans. Many Buy Now Pay Later services offer interest-free payment options if customers repay the installments within a specified period. This eliminates the burden of accruing interest charges, making it an attractive alternative to traditional credit card payments.
BNPL can help improve your credit score
Buy Now Pay Later services can also help consumers build or improve their credit scores. When customers make regular, timely payments on their installments, it demonstrates responsible financial behavior. Positive payment history can contribute to an improved credit score, opening doors to better credit opportunities in the future.
This is one of the things Esusu does with TurnKey Lender platform by reporting timely rent payments to credit bureaus and allowing renters to pay off large charges over time.
Spread large sums over time
Last but not least, the whole point of the pay later phenomenon is to not have to pay all the money at once. While this applies most for individuals living paycheck to paycheck, Buy Now Pay Later provides a way to manage large expenses and cashflow without involving the bank. By spreading the cost of a purchase over several installments, consumers can avoid financial strain and budget more effectively. This flexibility allows them to make necessary purchases without having to wait for their next paycheck or having to liquidate assets.
Benefits of Buy Now Pay Later for businesses
According to Klarna, Implementing a pay later program leads to 41% increase in average order value, 35% increase in conversion, and a 45% higher purchase frequency.
And it’s not just the retailers and electronics stores who need to take notice. 71% of Americans who visit the dentist frequently would use BNPL over traditional payment methods. And 86% of pet owners would choose BNPL in place of traditional payment methods to help pay for future vet costs.
As a business, it’s important that you promote responsible use of credit products. At the same time, you will be protected from unreliable clients by the decisioning system inside your lending platform.
Increased average order value
Implementing Buy Now Pay Later services often leads to an increase in average order value. When customers have the option to spread payments over time, they are more likely to make larger purchases which look more affordable. Businesses can capitalize on this by strategically promoting the benefits of installment plans, boosting sales, revenue, and combating income seasonality.
Here’s a story of a furniture provider that successfully offers rent-to-own and leasing payment options in Florida.
TurnKey Lender Customer Success Story: Rent-to-own/Leasing Automation for Own it 4 Less
Improved customer retention and satisfaction
Offering Buy Now Pay Later options enhances customer satisfaction by providing greater purchasing power and flexibility. It caters to customers who prefer to make purchases without immediately depleting their funds. By providing this payment alternative, businesses can attract more customers and foster long-term relationships.
Provide financing to customers without third parties
Traditionally, businesses have relied on third-party financing options, such as banks, to offer installment plans to customers. Buy Now Pay Later services eliminate the need for intermediaries, allowing businesses to build stronger direct relations with their clients. This streamlines the process, reduces costs, and simplifies the customer experience.
What businesses can offer Buy Now Pay Later
Each day new businesses start offering flexible payment options to their clients and the BNPL phenomenon has moved far beyond the traditional lending and shows how democratized credit has become. Here are some of the business types that can benefit significantly from offering flexible payment options.
- Physical and online retail: Stores and e-commerce platforms offering a wide range of products that allow customers to finance their purchases.
- Home improvement financing: Businesses that provide financing options for home improvement projects, including renovations, repairs, and installations.
- Healthcare financing: Medical clinics, cosmetic procedures, dental offices, and healthcare facilities offering financing solutions for procedures, treatments, and medical services.
- Consulting and legal: Professional service providers, such as consulting firms and law firms, that offer financing options for their services.
- Fitness equipment: Companies selling exercise equipment and fitness accessories that allow customers to finance their purchases.
- Wedding services: Wedding planners, venues, photographers, caterers, and other vendors in the wedding industry offering financing options for couples planning their special day.
- Travel and hospitality: Travel agencies, hotels, and vacation rental providers that offer BNPL options for booking flights, accommodations, and vacation packages.
- Education and training: Institutions, schools, and training centers that provide educational programs, courses, and certifications with financing options available.
- Automotive industry: Car dealerships, auto repair shops, and rental services that allow customers to finance their vehicle purchases or repair expenses.
These are just the business verticals we see enter BNPL space most commonly, but every week we see new examples of innovative ways to embed lending into business operations.
Why keep BNPL in-house as a product or service provider
When working with third-party finance providers, your customers may often face unreasonable interest rates, inflexible repayment terms, and arbitrary financing denials which you won’t have any control over. These factors are likely to dissuade the client from business with you.
At TurnKey Lender we’ve worked with businesses who offer pay later options around the globe and their reasons for keeping buy now pay later in-house include the following.
The money stays in your business
When you delegate your pay later program to a third-party lender, you make less money on each sale, and you give up control over the customer data and lifecycle. This way you let the BNPL lenders reap all the rewards for your hard work and investments. When you are in control, any fees, upsells, and future business with the client are yours.
You control the whole customer journey
If you’re offering a pay later option, you need to be able to effectively manage it without taking on additional risks or overhead. By having control over the customer journey, businesses can optimize financing automation, streamlining operations and delivering efficient service. Having control is essential for better financing automation and a superior customer experience.
It’s easier to grow revenue
As a product or service provider, you share your business with someone else when you give the customer past sale to a third-party lender. You share the margin on each sale, you give up control over the customer data and lifecycle past the sale. Which isn’t perfect for the business owner that did all the work to make the sale just to hand the client over to the lender instead of keeping them and continuing this relationship yourself.
Offering Buy Now Pay Later options on your products or services with TurnKey Lender
To outperform one’s industry peers in financing terms and user experience, one-size-fits-all solutiond aren’t good enough. Businesses need an intuitive and configurable platform that allows offering the pay later option at checkout on your terms. TurnKey Lender does just that with a fully independent infrastructure tailored to businesses’ exact requirements.
With TurnKey Pay Later, businesses can offer a digital pay later experience that exceeds what Affirm and PayPal provide, while being personalized for your clients.
You will have control over program terms, promotions, approvals, and rollovers, allowing for customization and improved customer experience. The platform combines automation and instant analysis of borrower data, ensuring efficient and seamless transactions.
Effortlessly adjust details of your pay later program, run the system on autopilot or manually control who gets approved and on what terms. Once the system is in place and running, it’s highly automated so you can save as much as you can on staff and paperwork.
Where are we and where is it headed
Digital lending technology is becoming more and more accessible, lowering the industry entry barrier and making it possible for any business owner to offer BNPL plans to their clients.
At one point not so long ago, just accepting card payments was innovative for a business. Then, tap-and-go came around, further simplifying payments. Now, BNPL options become another standard because of the benefits they brings both sides of the transaction.
As BNPL continues to evolve, it’s becoming an integral part of the lending landscape, shaping the way people and businesses make purchases. Powered by the business benefits, growing audience familiarity, and the accessibility of the lending technology, the pay later phenomenon is only starting its march with plenty of the marketplace still underserved for a little while longer.
