Buy now pay later is one of the best and the most popular credit schemes where users can download the app and use the facility of buy now pay later online. This allows users to shop online. They need to pay a token amount upfront. This is around 20% of the value of the goods purchased. The balance amount is payable in equal balanced EMIs (Equated Monthly Instalments) that the user needs to pay over six months upto 2 years. This is a great convenience, and users can pay easily when they can afford it. Users can also pay in bulk when they receive unexpected bulk payments, with no foreclosure charges.
How buy now pay later is advantageous
There are several advantages to this scheme for buyers and shoppers, and they include:
- BNPL apps can be downloaded and operated from a mobile phone or any device with an internet connection.
- BNPL apps can be used for online as well as physical shopping. Physical shopping is very easy, and the user just needs to ensure that the particular business or facility has BNPL facility. The user can just scan any available QR code to activate the BNPL facility.
- Not just buy now pay later shopping, users can use the BNPL facility for bill payments, payment of utility bills, and even bulk purchases such as furniture and automobiles. BNPL apps can also be used to pay utility bills such as electricity and school fees.
- Users and buyers also get the usual benefits of cash backs, discounts, and seasonal promo offers.
- Many BNPL apps also offer personal loans to their subscribers and users with little to no credit checks.
- The process is totally online, and there is no need for repeated visits to banks, NBFCs (Non-Banking Finance Companies), or BNPL service providers.
How is the deal for merchants?
Buy now, pay later shopping has tremendous potential for merchants. Merchants also need to download a BNPL app and register themselves as merchants. Only then will their store feature in online searches by BNPL online and physical users. Studies and market research has shown that the BNPL facility resulted in about a 30 to 32% increase in sales due to a perception of better affordability. This factor in itself generates better revenue for merchants.
Whenever a buyer or user purchases the buy now pay later app, the user pays about 20% upfront. The merchant, however, gets paid in full, and the service provider takes the risk and collects the balance payment in the form of EMIs. This is another advantage to the merchant, and there is no risk of deferred or default in full payment.
The next benefit to the merchant is free publicity and advertisement. Once a merchant takes the membership, subscription, or franchisee of a particular BNPL app, the store and products of the merchant become visible to all users linked to that particular app. The products and stores of the particular app will become visible to searches by all members, which means more sales, revenue, and profits. Thus, BNPL becomes a platform for merchants to get a ready market with credit facility at no risk to the merchant whatsoever.
Many BNPL apps offer promos and discounts to its subscriber base for using the BNPL app in the light of intense competition. This means more sales, and the merchants benefit directly in terms of sales and revenue.
Online merchants get much lesser cart abandonments with the BNPL facility. This is a typical phenomenon where online shoppers begin shopping, adding items of their choice to an online virtual shopping cart. After a while, shoppers discover that the total value of the shipped items is more than they believe they can afford, and they abandon the shopping cart without paying and just checkout. Merchants can view abandoned carts as lost sales and lost opportunities. With the BNPL facility in hand, shoppers proceed with completing a sale, and there are lesser cart abandonments.
Merchants are getting better revenue by using an integrated BNPL model, which is not just available as a POS (Point of Sale) mode during final payment but integrated and combined with the entire process. This essentially means that the app interacts with users at every stage and offers higher repayment periods and EMIs spread over a longer period for more expensive items to make them more affordable.
Merchants are better-taken care of
Changes in the mode of operation of buy now pay later service providers offer better scope for merchants to generate more revenue. Their interaction with customers has increased, and changes in the BNPL mode of providing credit steadily bring more business.