How Businesses Increase Their Revenue With BNPL
Buy now, pay later (BNPL), sometimes also called point-of-sale (POS) lending or POS financing, is growing rapidly in the e-commerce payment option trend. Mostly popular among Millennials and Gen Z, the payment option has increased over 50% in 2021.
BNPL offers various advantages to retailers, including customers’ motivation to make a series of manageable payments. In addition, providing BNPL financing to customers also helps retailers retain customers who might not otherwise visit their shops.
Using dealer distributor financing services from fintech companies like KredX, companies can extend credit pay-outs to the end-users in the form of BNPL.
How Does The BNPL Business Model Work?
Traditional credit cards feature a relationship between the consumer and the bank or the credit card company. However, transactions relating to BNPL feature a relationship between the consumer and the merchant, almost like a loan.
The concept of this business model is extremely simple. The consumer makes a purchase and completes an online transaction. But, instead of paying the entire amount, he/she makes payment in instalments over a period.
Additionally, many third-party BNPL providers conduct soft credit checks to steer clear of giving money to people who have previously shown general disregard to credit repayments. Moreover, some BNPL providers offer a consistent interest rate, whereas others formulate interest rates based on parameters like purchase price.
How Does BNPL Services Increase Revenue?
In recent times, BNPL has rapidly become table-stakes for shop owners. Many retailers have introduced the payment method online, while some are offering the service in-store and online.
Moreover, as per Forbes, BNPL is not only becoming table-stakes, but it is gradually becoming an inflexion point, with most retailers initiating pay-over-time options.
BNPL’s growth is not surprising; given the benefits, it delivers to individuals. For instance, it helps retailers gain a wider customer base, which in turn increases their sales.
Here are a few ways through which BNPL services can increase revenue for a business:
- BNPL provides customers with the opportunity to upgrade to premium versions of the items that they usually buy. They purchase such items by making smaller payments over time, which increases affordability.
- It is a flexible, convenient, and modern payment method featuring lower EMIs. Also, it levies an interest rate of 0% or close to the value depending upon the merchant.
- According to Citizen’s survey, 76% of consumers are more likely to purchase an item when offered a payment method backed by a perfect point-of-sale experience.
- BNPL also increases conversion rates. The payment method extends retailers’ reach by increasing the possibilities of a sale. With BNPL in functions, retailers can attend to the customers who may have avoided the store due to budget constraints.
Interestingly, many consumers spend a huge sum of money when they get the facility to spread out payments over time. Interested consumers may end up buying multiple items in a single online or offline shopping spree.
The end result: maximised revenues!
According to Cardify’s survey, almost 50% of consumers spend 10%-40% more when using BNPL than a credit card.
There are also long-term revenue gains. The positive effect of BNPL services creates loyal customers who repeatedly visit the merchant for future purchases. All of these factors lead to healthier revenue generation and significant business growth in the long run.
Reasons Why BNPL Should Be In A Retailer’s Consumer Lending Portfolio
Here are a few reasons why every retailer should consider implementing BNPL services into their business:
- Meet The Consumers’ Exact Needs
An extended benefit of implanting BNPL is that the retailer will be able to meet the customer’s exact requirements. We all are heading towards a future where purchases and payments are made to catch up and eventually meet in the middle. Hence, the lenders act as middlemen by providing the consumer with the products they want and when they want it.
- Increase In Brand Awareness And Customer Acquisition
One of the primary benefits of BNPL is to attract customers. Now, the LTV and the customer’s degree of access will depend upon the degree of integration of the lender into the customer’s journey.
- Increase In One Time Purchases
The flexible payment option through BNPL allows customers to buy multiple products in a single visit. This increases the retailer’s share of wallet with the customers.
Tips To Execute BNPL The Right Way
As with every other technological advancement, BNPL too comes with its own set of challenges. For instance, finance offering at the sale point implies that the bank’s brand value falls under the same standards as the consumers’ product brands that it is trying to finance. This can be difficult, but at the same time, rewarding.
Here are 4 tips through which retailers can overcome such challenges and execute a BNPL service accurately:
- Use a user-centred approach to find gaps in customers’ needs.
- Development of a customer back-end platform integration
- Drive brand loyalty through data-driven, personalised marketing campaigns
- Implement UI/UX design to create a seamless consumer buying journey
As the world of e-commerce evolves and grows, it is no surprise that payment methods embrace newer techniques. Digital wallets have been increasing in the last few years now, but the trend doesn’t stop there. Now, more and more customers prefer BNPL services than ever before.
Hence, if a retailer wants to attract customers and open ways for more purchases, BNPL should be an essential part of a retailer’s checkout operation. They can also download KredX’s MANDII app for instant access to credit for their buyers, dealers, and retailers with minimum documentation. With options like dealer distributor financing, businesses can induce the increase in purchasing power of the customers with ease.