The Effects of Buy Now, Pay Later for E-Commerce Sites
Buy now, pay later (BNPL) exploded in the e-commerce sphere in the last few years. It’s essentially what it sounds like. A shopper purchases an item from an online retailer but doesn’t have to pay until later. Unlike similar financing options, like a credit card, users pay little or no interest as long as they make payment on time through one of the accepted methods.
Those methods vary by provider but typically include paying in full within 30 days or paying in installments over a set period of time. Methods that allow more time for repayment include low interest or a higher purchase price.
For e-commerce sites, BNPL is important because more and more consumers expect to have it as an option. So, how will this affect your business, and is BNPL right for every online retailer?
The Growth of BNPL E-Commerce Sites
If you recently purchased anything online in the fashion, beauty, or home sector, you probably noticed an option at checkout to buy now and pay later. BNPL has grown increasingly popular with consumers, and as a result, more e-commerce sites offer it.
The growing BNPL trend got a boost from the pandemic. People faced restrictions on going out and making purchases and turned more often to e-commerce sites. Many also struggled financially during the pandemic and needed alternative financing options.
BNPL isn’t an entirely new concept, but it is new to the e-commerce market. It is an updated version of installment payments, and layaway offers that have been available for many years.
Customers who like and use BNPL do so for several reasons:
- To purchase something currently outside their budget
- To avoid credit card interest and fees
- To avoid the credit check usually necessary to borrow money
- Because they don’t have credit cards, or the cards are maxed out
- Because they don’t have a bank account
How BNPL Affects Consumer Spending Habits
Having another payment option on an e-commerce site naturally shifts consumer behaviors to some degree. Providers make it easy and low-commitment for consumers. Unlike credit cards, each transaction is a one-time deal, there is little or no interest, and approval is nearly instant.
For consumers, this makes it easier to buy things they might have previously hesitated to purchase without the BNPL option. An item that is a little outside the budget seems like a more reasonable purchase if they get a month or more to pay it off interest-free.
Another change is that consumers are less likely to abandon their virtual shopping cart with BNPL. Many people shop online, fill the cart, and then hesitate and rethink the purchase, ultimately abandoning it. For some, the option of BNPL is enough to push them through the sale.
Ultimately, BNPL leads people to spend more money more frequently. According to studies, 30 percent of people using BNPL spend more than they would have without that option. One-third of users report buying something that they would not have purchased without BNPL.
The Benefits of Buy Now, Pay Later for E-Commerce Businesses
Consumers have responded well to BNPL, especially younger Millennial and Gen Z shoppers. BNPL will only continue to increase, which means all e-commerce sites need to consider working with a provider to offer it.
Inevitability isn’t the only reason to start offering BNPL. There are important benefits for e-commerce businesses. Because it is increasingly popular with younger buyers, offering BNPL can attract new customers. Added to other online marketing strategies, like using the Ahrefs Tool Guide: Keyword Explorer for e-Commerce to increase page ranks, BNPL reaches additional consumers who now rely on this payment method.
Also important is the fact that BNPL helps businesses stay competitive. If every other retailer in your segment offers it, your company looks dated and out of touch. If not that many other sites have it yet, you can use BNPL as a way to set yourself apart from the competition.
In the end, BNPL can increase sales in your e-commerce business. BNPL offers consumers an easy, fast, low-risk way to make additional and more costly purchases. If a customer to your site likes what they see but hesitates because of the price or because payday is still a week away, BNPL could be just what they need to push them to buy.
BNPL is Here to Stay
There is no doubt that BNPL is not only here to stay but will continue to grow. Consumers like it and use it. Consumer demand means that it is likely to become a staple of the e-commerce experience. If you run an online retail business, get more information from BNPL providers to determine if it makes sense for your site.