Buy Now, Pay Later: How BNPL Companies Impact the eCommerce Industry

Buy Now, Pay Later: How BNPL Companies Impact the eCommerce Industry

How many times have your been to an online shop and browsed the items you liked, only to abandon it later?

There are many things that we want and desire to purchase. We all had to make compromises and sacrifices in order to buy the things we wanted.

Online buyers can buy all these items with their credit cards, but the extra cost scares away potential customers. These are the worries that customers have when they leave your site without purchasing anything.

Is there a way for customers to buy all the items in their cart without worrying about the large bill? Visitors can purchase all they want thanks to the buy-now-pay-late (bnpl), which allows them to do so without worrying.

This article will be based on the video below and will explain how BNPL payments can help b2b as well as b2c eCommerce companies.

What is Buy Now, Pay Later (BNPL), exactly?

The newest payment option is Buy Now, Pay Later (BNPL), which revolutionizes the way people shop. BNPL allows customers to purchase goods now and then pay them off later. Generally, BNPL does not incur interest. BNPL arrangements are also known as “point-of-sale instalment loans” and are becoming a popular payment option, especially when you shop online.

How does BNPL work?

There are many different types of buy now-pay later systems. Each company offering BNPL service has its terms and conditions. However, the general principle of point-of-sale loans is this:

  • Customers can go to participating shops and select the Buy Now Pay Later option at checkout.
  • Customers will be authorized after they have made a small deposit of 25%.
  • The balance is then paid in an instalment of interest-free payments.
  • Customers have the option to choose which payment method they prefer. You can pay by bank transfer or cheque. Payments can also be automatically debited from your bank account or credit card.

BNPL services do not charge interest or fees. However, they do have a fixed repayment period that can be multiple weeks or even months. Customers are usually told upfront how much they will have to pay each month and what the amount is.

You want to learn more about optimizing the checkout process?
Check out our article 8 checkout optimization methods to reduce cart abandonment rates.

How do you distinguish between a credit card and a buy now-pay later option?

It may seem strange that a BNPL solution is needed when it is possible to add financing to your website. They are very different from what you might imagine.

  • BNPL services don’t require a hard credit check.
  • If clients pay within the agreed terms, they don’t charge interest
  • BNPL also offers a convenient payment frequency for customers.

Credit cards can cause customers anxiety. Late payments and interest costs can cause credit scores to drop.

Customers are more likely to use BNPL services when they have access to Gen Z and Millenials who are now adults with money. If your target market falls into any of these categories, you should consider BNPL to help your eCommerce business.

Most importantly, users who buy now and pay later are familiar with these solutions and have a high level of trust in them.

What is Buy Now Pay Later eCommerce?

In recent years, BNPL (buy now, pay later) has been a prominent feature of the eCommerce marketplace. Its popularity has only increased in recent years. BNPL customers can either pay the fee in instalments or buy items in one lump sum using BNPL services. There are no additional fees and almost no interest rates.

The coronavirus epidemic also has accelerated the growth of eCommerce, which has increased the demand to have simple online financing options. Because consumers are switching to buying products online, BNPL suppliers have seen an increase in their reach.

Due to the pandemic, millions of people were made homeless and in financial distress. They needed more flexibility when purchasing goods. Many people were able to pay off their debts during the financial crisis. This made interest-free BNPL options more attractive than accumulating another large credit card balance.

The buy now, pay later financing system has greatly stimulated b2b eCommerce. It is easy for retailers to purchase products and then pay for them.

Why use Buy Now, Pay Later in eCommerce Businesses?

Now that we’ve covered the benefits of customers, what about the advantages for businesses?

BNPL helps you avoid the most frustrating situations when eCommerce is not working.

According to data, nearly 70% of carts have been abandoned today by potential customers. Around 35% of cart abandonment can be attributed to the lack of preferred payment options. This problem can be solved by implementing a Buy Now Pays Later option. This will help increase sales.

  • Competitive

Recent reports suggest that such payment methods will be more popular. Amazon launched a similar service in August. Apple is currently working on a similar solution. Other eCommerce businesses may follow the BNPL trend. By 2025 , the number of BNPL payments is expected to be $680 million. You will have a competitive edge over your competitors if you implement it.

  • Conversion rate improvement

The BNPL business model has been proven to increase sales and conversion rates. 85% customers are more likely make a purchase when a seller offers interest free payment options. This can even increase the average cart size by 20-30 percent.

Learn how to increase your eCommerce sales using proven strategies.

  • Enhance customer relationships

Online eCommerce shops struggle to build trust and retain customers. You can spend years trying to build it, but not getting the desired result. BNPL could be your secret weapon. BNPL is a popular option that can increase customer loyalty by around 28%. You also get customer loyalty and a higher customer lifetime worth.

Customers often don’t buy because they don’t have the money. This was especially true during the pandemic, when many people lost their jobs. Without a BNPL, such customers would simply leave your store. Customers will prefer your website to the others if they have access to a payment system that is simple, especially if they are shopping for essentials. Online grocery stores will reap the benefits of BNPL services.

Market Overview: Buy Now, Pay Later

BNPL’s straightforward solutions have modernized the B2B/B2C eCommerce sector. They offer customers more flexible payment options than traditional methods.

Precedence research projects that the global market for buy now/pay later peaked at USD 125.2 billion in 2021. You can buy now and pay later online to purchase items in stores or online. The market for buy now/pay later will grow as more customers are aware of the instalment-based payment options. The market’s potential growth will be further enhanced by the absence of interest charges in buy now, pay later.

Buy now, pay later financing offers many benefits, including convenient and affordable payment services, quick credit card fund transfer at point of sale (POS), and increased personal information security. All of these factors contribute to the growth of the market.

BNPL Boom: Why?

What is the secret to this boom in buy-now-pay-later? There are many factors at play.

  1. People love BNPL services for their ability to pay over time.
  2. A healthy economy is second for BNPL companies. Due to lower unemployment and increased consumer spending, more people are willing to use the conveniences offered by BNPL services.
  3. Finally, BNPL companies are reaping the benefits of eCommerce’s growing popularity. People are increasingly shopping online and looking for ways to purchase things without paying upfront. It’s easy to shop online with BNPL services.

Providers: Buy Now, Pay Later

Although there are many BNPL companies out there, some are more well-known than others. According to data compiled by Statista from corporate data sources, Klarna and Zip are the largest buy-now-pay-later businesses by transaction volume.

Klarna has the largest GMV (gross merchandise value) at $53 billion. Afterpay comes in second with $11 billion of GMV. Affirm’s GMV is $4.6 billion, Zip’s GMV is $2.1 billion and Sezzle’s GMV is $400 million.

There are many BNPL suppliers that have lower gross merchandise volumes than the market, and there are well over 50 of them.

Klarna’s strength is in being the first company to offer a solid BNPL option with discreet credit checks. This allows customers to spend immediately and not incur interest. Klarna has also worked with more than 100,000 merchants and provides top-rated software that is both user-friendly and efficient.

It will be interesting to see how these businesses compete over the coming years. All of them will experience continued growth as buy-now-pay later becomes more popular.

BNPL Companies & Providers List

Below is a list containing companies from various regions that offer BNPL services for eCommerce stores.

  • Affirm
  • Afterpay
  • Alliance Data
  • American Express
  • Chase
  • Citi
  • Klarna
  • Mastercard
  • JPMorgan Chase
  • PayPal
  • Quadpay
  • Sezzle
  • Shopify
  • Splitit
  • Stripe
  • TSYS
  • Visa
  • Zip

How to integrate eCommerce BNPL options into your business

To obtain BNPL options at your business’s checkout, you will need to get in touch with the BNPL provider in your area. Many buy now, pay later providers will require that you contact them through their website. It will require you to fill out forms detailing the countries where you are operating, your annual sales and basic contact information. It is easy and quick to inquire about BNPL options. This allows you to compare the advantages and drawbacks from different providers before signing up for one or more.

How to integrate BNPL and Magento

Many solutions are available that enable BNPL functionality to be added to eCommerce websites without requiring lengthy development. Magento eCommerce Platform is perfect for BNPL. Afterpay, Affirm and Klarna all have Magento 2 modules.

Magento eCommerce stores can easily integrate BNPL in a short time.

You want to learn the top reasons that Magento is preferred by businesses?
Check out our article about the best reasons to Magento eCommerce Development to learn why Magento is the right choice for building an eCommerce store.

Final Thoughts: What BNPL means for eCommerce

BNPL is a relatively new method of payment that has a major impact on eCommerce. Adidas, BestBuy and Walmart are just some of the big brands that offer BNPL at checkout. BNPL should therefore not be overlooked. While it may not be the best choice for every eCommerce shop’s needs, staying current with the preferred payment methods is crucial to meet their needs and increase sales. BNPL will likely grow in importance within eCommerce. Therefore, eCommerce businesses should keep an eye on it.


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