The pandemic has caused a huge shift in how people purchase products. For most, it was all about shopping online and paying with a debit or a credit card. Businesses needed to work with high-risk merchant account processors to offer customers a variety of payment options to adapt to the changing needs of consumers. But there’s also another alternative form of payment that’s gaining a lot of traction from customers today.
This idea comes from one of the oldest payment options on the market—buy now, pay later. But while it’s convenient for consumers, is it also beneficial for businesses?
What is “buy now, pay later”?
“Buy now, pay later (BNPL)” is essentially a deferred form of payment where a customer can purchase a product and pay for it in intervals over a fixed time period.
There’s an initial amount a customer needs to pay followed by installments depending on the terms of the agreement.
What are the benefits of buy now, pay later options?
Having the option to purchase a product and pay for it on flexible terms has proven to be beneficial to a lot of customers, especially those who can’t afford to pay in cash and in full.
It’s also a lot easier to apply for a BNPL plan than a credit card because these companies don’t have a lot of requirements and you also don’t need to pay any fees.
According to 42% of respondents on a survey, they use BNPL since the terms are clearer than those with credit cards, so it gives them more confidence in making online purchases.
Is BNPL risky for businesses?
The new BNPL method is beneficial for businesses to some extent. For one, it helps to increase sales because paying in installments is more feasible for a lot of customers than doing it in cash or with interest. Businesses that offer BNPL also reported seeing more new and diverse customers.
For instance, the brand BlackCool reported its sales increased by as much as 600% after offering BNPL. Its CEO said that the payment plan brought in “different demographics, including price-conscious consumers who may think our premium products are priced beyond their reach.”
But with all those benefits, there are also the risks of offering this kind of plan including fraud and snowballing payments. According to experts, BNPL models are not financially sustainable in the long term, which means that the costs, terms, and other factors may change over time.
How can you protect your business?
If you want to offer BNPL plans to consumers, you can do it but with an extra dose of caution. For one, it’s very important to find high-risk merchant account processors that will help you process payments and set up these BNPL plans confidently, so it can benefit you and your consumers in the long run.
You also need to plan your offerings carefully and assess customers before you offer them a BNPL plan to ensure that they will pay on time and you won’t have to deal with a lot of pending payments.