If you’ve purchased anything online in the past few years, you may have noticed a new payment option on the checkout page. Buy now, pay later (BNPL) is a form of short-term financing that allows customers to pay for their order in installments after the purchase rather than all at once.
Here’s how it works, the customer will start with a down payment of a percentage of the total sale that’s then followed by a series of installments that span over a few weeks and up to a few months. These payments are usually required to be deducted automatically from the customer’s card or bank account.
Unlike a credit account, you can’t carry a balance indefinitely, but there’s typically no interest charged, and customers are much more likely to be approved than they would be for a traditional credit account. Klarna and Afterpay are two of the most popular BNPL payment options that many online retailers are adding to their shopping experience to grow their business.
THE STATS
According to data from Ryder, total BNPL spending in the U.S. will grow by 21.7% to $90.51 billion by 2029. A survey from C+R Research found that 59% of respondents claimed they had used BNPL to purchase an item in 2021. It’s not just for unnecessary purchases either, with the rise of inflation and cost of living many consumers are starting to use these payment deferment options for essentials as well. LendingTree’s latest study regarding BNPL finds that of the 43% of respondents who had used BNPL in 2023, 21% had done so for basic needs such as groceries.
This data is all enlightening to the future of BNPL options for consumers who are looking for a payment deferment option that comes with less risk than a credit card. Clearly there is a market for flexible payment options that is only expected to grow in the coming years, this offers an opportunity for retailers to capitalize on the value of BNPL. There are many benefits of adding more flexible payment options for retailers.
HIGHER CONVERSION RATES
Customers who might not have been able to afford your product otherwise now have the option to purchase regardless.
CUSTOMER LOYALTY
For those who frequently use BNPL, offering this option can increase customer loyalty as well as those are customers are more likely to shop again since you offer the payment options they want.
HIGHER CART VALUE
The option to pay less upfront will often result in customers purchasing more items resulting in higher cart value.
LOWER RETURN RATE
Flexible payment options allow customers to purchase with more confidence, which can reduce the rate of customer returns.
The biggest trend in eCommerce is meeting the ever-changing demands of your customers and hopefully finding new customers along the way. Customers expect an easy and seamless shopping experience that effortlessly meets their needs, and retailers have a responsibility to try to keep up.
To learn more about how Virid can help to keep your eCommerce website optimized and successful, schedule your free consultation today.