{"id":30457,"date":"2022-03-14T15:58:47","date_gmt":"2022-03-14T12:58:47","guid":{"rendered":"https:\/\/www.x-cart.com\/?p=30457"},"modified":"2023-09-12T09:22:52","modified_gmt":"2023-09-12T06:22:52","slug":"how-does-buy-now-pay-later-work","status":"publish","type":"post","link":"https:\/\/www.x-cart.com\/blog\/how-does-buy-now-pay-later-work.html","title":{"rendered":"How Does Buy Now Pay Later Work with Your eCommerce Platform? Choosing an Ideal BNPL App"},"content":{"rendered":"\n

While sales digitalization is gaining pace, more and more online sellers face the challenge of attracting and – what is more important! – retaining customers. The fact is that today’s shoppers are looking for a meaningful and memorable experience, prioritizing it over product or price<\/a>.<\/p>\n\n\n\n

This is why many companies are trying new strategies focused mostly or solely on UX enhancements, like Walmart hooking its customers<\/a> by testing the waters with Augmented Reality<\/a> or Amazon perfecting its A10 ranking algorithm<\/a> to provide the most accurate search results; just to name a few. <\/p>\n\n\n\n

In their turn, online business owners are trying to match the buyers’ needs by delivering a more personalized and seamless checkout experience. And this is where “Buy Now, Pay Later” payment options make the running. <\/p>\n\n\n\n

Going by the recent studies, more and more American adults tilt toward interest-free customer financing options when purchasing from their favorite online retailers.<\/p>\n\n\n

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\n \"Percentage<\/picture>
\n Source: The Ascent<\/a> <\/figcaption>\n <\/figure>\n <\/div>\n \n\n\n

Evidently, eCommerce installment payments are gaining momentum, but why are they so attractive for customers, and what exactly does a Shop Now Pay Later concept entail? <\/p>\n\n\n\n

Read on as we break down what Buy Now Pay Later is, which installment loan solution fits your eCommerce goals, and why installment payments are the key to a positive customer experience.<\/p>\n\n\n

\n First Things First: What is Buy Now Pay Later? <\/h2>\n\n\n\n

As the name suggests, Buy Now Pay Later (BNPL) are apps that define payment solutions allowing consumers to get a purchased item right away, but pay for it down the road. In other words, online customers are offered to split their total purchase into several interest-free installments instead of paying the full amount outright. <\/p>\n\n\n\n

While shoppers are comfortable with their weekly or monthly payments, online sellers feel safe getting paid in full through a partnership with a personal finance company, such as Affirm, Afterpay, or Klarna. <\/p>\n\n\n\n

In terms of eCommerce, this translates to higher conversion rates growing on the back of escalating consumer purchasing power, which makes a BNPL solution a sweet deal for both sides.<\/p>\n\n\n

\n How Does Paying in Installments Work? <\/h3>\n\n\n\n

At first sight, the algorithm of point-of-sale loans is quite simple and transparent: <\/p>\n\n\n\n

Customers add items to their carts => Select a plan at checkout => Create an account to be billed to => Complete their purchase => Get the products outright <\/p>\n\n\n\n

Although BNPL apps work similarly within online stores, each installment plan is unique to its financing provider. As a matter of fact, personal loans vary depending on the BNPL service you choose, as well as payment terms, late fees, and credit period.  <\/p>\n\n\n\n

While trying to pick a BNPL solution that would perfectly meet the customers’ needs, online retailers should factor in things like merchant discount rates and other administrative costs paid to BNPL firms for billing and servicing.<\/p>\n\n\n

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Side note:<\/strong> Merchants typically pay the BNPL provider between 2% and 8% of the purchase amount, and in some cases, a small per-transaction fee, which might be expensive for small businesses.<\/p>\n\n<\/div>\n\n\n

All that said, choosing an installment payment provider that would hit your eCommerce goals  – and also appeal to your customers – can be daunting. <\/p>\n\n\n\n

Let’s run over the main benefits and hidden risks of utilizing BNPL from a customer’s and retailer’s perspectives.<\/p>\n\n\n

\n Pros and Cons of Using a BNPL Option <\/h2>\n\n\n\n

It has always been true that a positive checkout experience can significantly benefit conversion rates. When it comes to diversifying your payment methods, trying to walk in your customer’s shoes can be helpful. Why is BNPL so irresistible in the eyes of an online shopper?<\/p>\n\n\n

\n Benefits From a Buyer’s Perspective <\/h3>\n\n\n\n

In the early days of shoppers’ financing, customers opted for personal loans exclusively for large purchases, like cars, pieces of furniture, or home appliances. To date, consumers still tend to buy big-ticket items with installment payments, but now this concept isn\u2019t just geared toward the shoppers who can\u2019t afford a product.<\/p>\n\n\n\n

What happens is todays’ customers prefer no-interest loans for even small purchases, as they like to feel secure while being able to balance their larger expenses over time. Unlike credit cards or layaway plans, Buy Now Pay Later is more focused on the shoppers’ needs, offering a budget-friendly financing solution.<\/p>\n\n\n\n

Here’s a quick walkthrough over its main benefits to a customer:<\/p>\n\n\n\n