“Buy now, pay later”: what is it and what are its advantages?

In today’s ecommerce landscape, payment methods continue to evolve to adapt to changing consumer needs and expectations. In this context, a few years ago, a payment method emerged that has captured the attention of users and merchants: “Buy now, pay later”. A new payment alternative that emerges as a response to the demand for greater flexibility and convenience, in response to a time of inflation and other economic factors.

Here we tell you everything you need to know about integrating this payment method in your ecommerce, and what would be the benefits for both customers and merchants.

What is “Buy now, pay later”?

“Buy now, pay later” is a payment method that consists of splitting and deferring payments for purchases made. Instead of making a payment at the time of purchase, customers have the option to postpone payment to a later date, often after receiving the products or services.

Customers often use this method when purchasing low-cost products, typically fashion, sporting goods or household appliances. This payment model is a good alternative to be able to access products that we need immediately but we cannot afford the economic cost.

A very clear example is if an essential appliance in your home, such as the refrigerator, breaks down. If you don’t have the liquidity at that moment to face the expense, this could be your solution.  With “Buy now, pay later” you can buy a new refrigerator and pay for it in easy installments, with total flexibility and convenience.

The customer can choose at the time of purchase whether to pay for the product immediately or to defer payment by means of a credit granted automatically and to be repaid in easy monthly installments. These credits may or may not have interests and commissions, although normally it is not common. That is why it is important that the customer is properly informed of the rates and conditions of payment providers.

How does “Buy Now, Pay Later” work?

The operation of this innovative payment method is very simple and convenient, both for merchants and end users. We will explain a little more in detail:

How “Buy now, pay later” works for businesses

In this sense, for those merchants who want to integrate BNPL among their payment methods, they must hire the services of a payment gateway such as Paylands, which has a “Buy now, pay later” option. Once the integration is done, when making a purchase with this payment method, once the user has made the purchase, the merchant will receive the full amount of money thanks to the BNPL payment provider.

How “Buy now, pay later” works for the user

For the end user, the process is just as simple. Once at the merchant’s checkout, the user chooses from among the payment methods available at the merchant the corresponding “Buy now, pay later” or “Buy now, pay later”. Then, he selects the installments in which he wants to make the payments (this will depend on the BNPL provider that each ecommerce has) and the user’s creditworthiness is checked for financial approval. It is that simple and straightforward.

Who can use the “Buy now, pay later” payment method?

Anyone who meets the requirements set by the “Buy Now, Pay Later” service provider can use this payment method.  The most important aspects to consider may vary by provider and may include factors such as the amount of the purchase, the user’s credit history and other financial aspects. A smaller purchase will be more easily financeable for any provider, while a larger purchase will need to meet more requirements.

Benefits of “Buy now, pay later” for consumers

Financial flexibility

This method allows consumers to purchase products or services immediately without having to pay the full cost of the purchase all at once. This is especially useful when unexpected expenses must be met or a major purchase must be made.

No interest

Some companies offer this payment method without additional interest, as long as the customer meets the established payment period. This is a benefit for those who wish to avoid additional finance charges.

Facilitates higher value purchases

This method makes it easier for consumers to afford higher-value products or services because they can afford the financial cost little by little.

Instant approval

Financing approval with “Buy Now, Pay Later” is a quick and easy process. It has nothing to do with the lengthy process of applying for credit. Financial approval takes less than a minute, eliminating the bureaucratic red tape that causes so many headaches.

Benefits of “Buy now, pay later” for the businesses

Increased conversions and customer loyalty

The implementation of this payment model can lead to an increase in business sales. By removing financial barriers for customers, it facilitates the decision to buy, thus increasing conversions.

Offering a more convenient and flexible shopping experience not only generates more sales, but also influences long-term customer loyalty and retention. This loyalty can lead to repeat purchases at the same retailer in the future.

Reducing cart abandonment rate

Cart abandonment is one of the most common ecommerce challenges. However, by offering flexible payment options, such as the “buy now, pay later” model, the cart abandonment rate can be reduced. Customers choose to continue with their purchase when they see that they can split the cost of the purchase and do not abandon the shopping cart.

Increased average ticket

This payment method encourages the purchase of more expensive products by eliminating the need to pay immediately. By allowing deferred payment, customers feel more comfortable purchasing higher-cost products or services that they might otherwise postpone or reconsider.

BNPL Considerations to Take into Account

For the implementation of “Buy Now, Pay Later,” both consumers and merchants should be aware of several key considerations.

For consumers, they should understand and be informed about the payment provider’s terms and conditions. Know if there are interest rates and payment deadlines. This avoids unpleasant surprises and possible additional charges. In addition, the user should evaluate whether the use of “buy now, pay later” fits individual financial needs and payment capabilities.

On the other hand, merchants should consider integrating the method into their existing payment strategy, making sure to choose reliable providers and set clear policies regarding payment and return management. They should also make sure that the chosen payment provider offers that service in the relevant market and what is the credit limit they grant in each territory.

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From PaynoPain, as a payment solutions provider, we can help you to offer your customers a wide variety of payment methods. If you want to know more about “Buy now, pay later” options, do not hesitate to contact us.