Is Buy Now Pay Later The Next Big Thing in Online Retail?

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Pranu Dhyani

Brands & Communications

eCommerce opened doors for many other business models including models around financials. Fintechs and banks have emerged with different payment models and another one that has been gaining ground is the BNPL or the Buy Now, Pay Later.

BNPL allows consumers to buy any item without paying for it upfront rather than have the payment distributed in some instalments at a fixed payment schedule. Most BNPL providers do not charge any interest and even if they do it’s minimal.

The BNPL model has changed the online payment scenario and is transforming digital retail to a great extent. Easy payments and comfortable buying definitely enhances the overall consumer experience driving more sales.

Benefits:

No processing charges and additional fees: Unlike traditional credit payment options, BNPL doesn’t ask for processing fees or any other hidden charges making it super easy and comfortable for customers to make purchases.
Flexible repayments: It’s always convenient for customers when they don’t have to pay the entire amount at once and even more convenient when there are no-cost EMIs. BNPL offers customers a seamless purchase experience and unburdens them of the extra money they have to pay in the name of interest. Even though credit cards make it easy to buy expensive stuff but the interest on the payment is usually an uncomfortable experience for buyers. With BNPL, one can pay the amount in fixed and scheduled instalments.
No documentation hassle: BNPL allows one to use the services without submitting documents and undergoing long processes rather it just requires a quick KYC. This makes it very accessible and comfortable.
Higher conversion rates: The average cart abandonment rate for the year 2021 was found to be 69.82% concluding from 46 reports. Around 7% of the people left their carts abandoned due to unsuitable payment methods. BNPL now gives a chance to retailers to get this per cent converted.
Customer experience: A seamless shopping experience keeps your customers coming back to you. From a fine website design to excellent pictures, from awesome products to satisfying prices, customers want a great experience. effortless checkouts with a variety of payment options add to the overall shopping experience for the customers. BNPL offers convenient payments by unburdening the shopper of paying the complete amount in one go.

Consumers are always looking for convenient ways to buy products and BNPL has proved to be their saviour. Consumers face many challenges while shopping for example everyone does have an aversion towards paying credit card interest but it proves to be the last resort if there are no other options. At times a consumer might not have a budget for something but wouldn’t want to miss the chance of buying it too, that becomes a real dilemma.

Top Companies in the BNPL market:

Among the leading BNPL providers, many Fintechs too have managed to set foot in the sector.

Below are the BNPL fintech giants by market capitalisation. Affirm has the biggest market share with a whopping $27.4 B, followed by Upstart, Du Xiaoman FinancialP, Green Sky, Ziltech, Creditas, Zip Co, Daily Pay, and Sunbit.

The boom of eCommerce has paved way for many industries with different business models to flourish and BNPL is certainly the next big thing!

BNPL trends

E-commerce has seen drastic changes over the years in all aspects. Similar is the scenario with everything that is linked to it. The buy Now Pay Later model has been getting popular and is being widely accepted by both merchants and customers.

According to Statista global BNPL transactions are forecasted to increase by over $450 billion between 2021-2016 while the current global market share stands at 3%.

BNPL is changing the eCommerce for better. Here are some important BNPL trends for online retailers to look out for in order to leverage the model:

Just like BNPL is changing the way people shop, eCommerce is further pushing BNPL into the limelight. In the past five years, eCommerce has seen a surge in revenue due to people getting pushed to buy online and creating a habit of it now. People have adopted e-commerce in their day-to-day lives and BNPL is proving to be a great payment option for them.
Young people are seen to prefer BNPL over credit. According to a report Gen Z contributes to 40% of BNPL services.
BNPL will see more regulation in the coming years. BNPL currently doesn’t come under any regulatory body but the government may step into it seriously as there are some risks associated with the model.

With an increasing number of internet users, eCommerce is also incessantly increasing and wouldn’t cease to increase for a long time. Everything is going digital and hence shoppers are increasing too significantly.

How BNPL is changing online shopping:

Though the buying capacity of people has increased significantly the burden of paying for something expensive in one go still poses a problem for many. Even people with good disposable incomes may burn a hole in their pockets with an expensive purchase and have a suffering budget. BNPL has made it very convenient for people

Though the credit card model also works in a similar way to BNPL, due to its high-interest rates, and fees and the fear of getting stuck in the loan loop makes a lot of people refrain from it. BNPL offers ease and affordability while the interest rates are either very low or zero, making it a preferred payment option. BNPL credit model has taken customer experience to another level.

According to a survey, only 8% of people preferred to use a credit card or overdraft option while BNPL was available.