Six reasons merchants are offering BNPL

There’s no getting away from BNPL. Its promise of uber-convenient no-fuss, no-fee installments that slice purchases into smaller amounts over a few months or delay payment, is proving a big hit at the checkout.  

But while Millennials, Gen Z and those who want to budget better are eager to sign up, some merchants have yet to be convinced it’s right for them. Higher transaction fees and the fear that BNPL will lead to more returns are leaving some merchants hesitant to offer it.

So, what are the advantages of offering BNPL and which merchants will benefit from adding it to their checkout?

Reasons BNPL works for some merchants:

1. Higher sales with lower risk
There are a lot of stats available around the uplift that BNPL delivers. This includes double-digit boosts in conversion, average order values (AoV) and even customer lifetime value (CLV). In the case of mobile, figures are even higher. And because the provider pays you upfront, there is no risk of bad debt for your business.

2. A better UX
BNPL provides customers with smoother experiences. There’s no need to re-register with new retailers and repeat customers can pay easily with BNPL using one click. BNPL players have also worked hard to make their products easy to integrate for merchants too. Unless customization is required, simple toolkits let you connect them quickly to ecommerce platforms like Shopify and Magento.

3. Powerful acquisition tool
As big BNPL brands gain traction, many are developing their own loyal fanbase sometimes representing millions of users. Through merchant directories, co-marketing initiatives, engaging social feeds and apps, they’ve become powerful acquisition magnets for merchants —- especially those looking to attract Millennials and Gen Z shoppers.

4. Confidence booster

If you’re a small or young ecommerce brand, consumers may be hesitant about spending with you or inputting their payment details. Having BNPL gives them the confidence to buy. Using a well-recognized BNPL brand can raise your own kudos through association.

5. Smoother sales cycles and cashflow
Offering BNPL helps your customers spread their spending between paydays, so you get a much smoother and more consistent sales curve.  This frees you from resorting to mid-month and out-of-season sales to try to shift stock. And, because you’re paid upfront by the BNPL provider, there’s no delay in settlement or impact on your cashflow.

6. Increased focus on sales and service

Because the customer settles with the BNPL provider direct, it means your staff are not tied up handling payment issues with customers.

Shifting mindsets from credit to BNPL plans

BNPL comes in three main options. All designed to be low friction, offer a great UX and deliver seamless financing at the checkout.

Are there any downsides to BNPL?

Interest-free BNPL is not classed as credit and so falls outside current financial regulations. While this makes it much easier for merchants to offer – as they don’t have to be licensed – it can also leave BNPL open for misuse.

There’s a growing concern that customers will be over-encouraged to spend more than they can afford. Avoid this by choosing a BNPL provider that actively educates consumers and provides online tools and apps to help them budget safely.

In sectors like fashion, BNPL can lead to multi-size buying and higher returns. But BNPL providers often say this isn’t the case and any small increases are quickly offset against the subsequent uplift in sales.

The secret to success lies in choosing the right option for your business

Offering Buy now, pay later can create numerous benefits for businesses. But, as always, it's all dependent on your business, its objectives and the products that you sell.

The fees that a merchant is charged can been quite high when compared to other payment methods. So, make sure your business model is one that will be able to take advantage of the increased revenue that BNPL has the potential to bring in if you are going to offer it.

Ultimately, the key is to offer your customers the right payment method at the checkout. A range of options gives them the flexibility to pay how they want to and will result in more successful sales for your business.