What is BNPL? Learn About the Benefits of Buy Now, Pay Later Services
BNPL (Buy Now, Pay Later) is a service that lets you pay for products in installments without a credit card. It offers modern payment flexibility and makes it easier for customers to decide to buy.
BNPL (Buy Now, Pay Later) is a financial service that meets the spending behavior of modern consumers who prefer to buy now and pay later, and its popularity continues to grow. For entrepreneurs or online business owners, BNPL is not just a new option for customers; it's also an opportunity to increase sales, close deals faster, and effectively reduce shopping cart abandonment rates. This article will introduce you to what BNPL is, along with its advantages and precautions that businesses should not overlook.
Table of Contents
• What is BNPL and How Important is it for Business?
• What is a BNPL Limit?
• How BNPL Works is What You Should Know
• What Are the Benefits of BNPL?
• Disadvantages of BNPL That May Affect Your Business
• How Do BNPL and Credit Cards Differ?
• BNPL is an Option Businesses Shouldn't Overlook
What is BNPL and How Important is it for Business?
Buy Now, Pay Later is an online payment system that allows customers to purchase goods and services immediately without paying the full amount at that time, instead dividing the payment into installments over a specified period. This has made BNPL a rapidly popular choice among digital-era shoppers.
What is a BNPL Limit?
A BNPL limit is the maximum amount of money each user is approved by the service provider to use for purchasing goods or services from participating merchants, without immediate payment. This limit is determined based on each user's repayment capability.
How BNPL Works is What You Should Know
In an era where customers demand greater payment flexibility, understanding how BNPL works is something entrepreneurs should not overlook, as it genuinely increases sales opportunities and enhances the purchasing experience. Here's how it works:
1. Select BNPL during checkout: At the payment stage, choose the "Buy Now, Pay Later" payment channel on the checkout page.
2. The system will redirect the customer to the BNPL page: The system will redirect to the service provider's website or app for login or sign-up.
3. Select the desired installment plan: Most providers offer options for monthly or bi-weekly installments, according to their specified terms. Customers must read and accept the terms before proceeding.
4. The merchant receives the full amount immediately: After the customer confirms the order, the system transfers the full amount to the merchant (minus agreed-upon fees) without waiting for the customer to complete all installments.
What Are the Benefits of BNPL?
BNPL is a financial service model that helps entrepreneurs expand their customer base and increase sales without directly bearing financial risk. The benefits of BNPL include:
• Increases Sales: When customers don't need to pay a lump sum immediately, purchasing decisions can be made easier and faster, leading to quicker sales closures.
• Reaches Diverse Customer Groups: Whether you sell high-priced items or services requiring upfront payments, BNPL helps customers with limited purchasing power access your products and services.
• Enhances Brand Image as Modern and Trustworthy: Offering flexible payment channels like BNPL helps your brand appear professional and aligned with modern consumer trends.
• Expands Online Growth Opportunities: Especially for E-Commerce businesses, BNPL can be an effective tool to increase conversion rates at checkout and reduce cart abandonment.
• Potential for Future Supplemental Income: In some cases, if customers pay late, merchants might receive a share of fees from the BNPL provider, which could become an additional revenue stream (depending on each system's terms and conditions).
Disadvantages of BNPL That May Affect Your Business
While BNPL is an option that can boost sales and attract customers, there are precautions that entrepreneurs should be aware of before implementing this model, including:
• Fees and Hidden Costs: Some BNPL models charge service fees to merchants, which can become a hidden cost for the business.
• Risk from Customer Overspending Behavior: If customers overspend beyond their means and encounter financial problems, it could lead to product returns, increasing management burden and impacting post-sales satisfaction.
• Unclear Communication of Terms and Conditions: If merchants do not clearly communicate terms and conditions to customers, such as fees customers are unaware of beforehand, it could lead to misunderstandings or disputes.
How Do BNPL and Credit Cards Differ?
Many may still be confused about what BNPL is and how it differs from credit cards. Let's look at the comparison table below:
|
Feature |
BNPL |
Credit Card |
|
Credit Limit |
Often has a limited amount per transaction/merchant and may change frequently |
Has a credit limit approved once, usable within the remaining limit |
|
Interest/Fees |
Mostly no interest if paid on time. May incur late fees if defaulted. |
May incur interest if minimum payment or installments are made, and other fees like annual fees. |
|
Usage |
Focuses on short-term installment payments. Mostly limited to participating merchants. |
Usable at merchants and services that accept credit cards generally, both online and offline. |
|
Credit History |
May affect consideration, depending on the provider's policy. |
Directly impacts credit history. Timely repayment builds good credit. |
|
Benefits |
Often few additional benefits. |
May offer various benefits such as reward points, discounts, travel insurance. |
|
Note |
*Product details (e.g., interest rates, installment periods, etc.) may vary. Further information can be found on each service provider's website. |
*Use only as necessary and repay the full amount on time to avoid 16% annual interest. |
BNPL is an Option Businesses Shouldn't Overlook
BNPL (Buy Now, Pay Later) is a payment strategy that helps customers decide to buy faster without immediate payment. It has therefore become a tool that entrepreneurs and business owners across various business types should not overlook to expand their customer base, increase sales, and accelerate sales closures, especially in an era where consumers prioritize financial flexibility.
Moreover, if you choose KGP's services, which support online installment payments via credit cards, your customers will be able to choose to split payments for goods and services according to their convenient cycles, increasing sales opportunities easily and quickly. KGP also supports payments via P2P Transfer, E-Wallet, Mobile Banking, and other online payment channels. It's truly an option that benefits both customers and sellers.
KGP, Payment. Make It Smooth.
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