Why Businesses are crushing over the new trend “Buy Now Pay Later”
- Posted on February 2, 2022 by Robert
- Reading time about 6 minutes
Increasing interest in online shopping and extensive convenience has brought in wide popularity to a trend as lazy and convenience friendly as today’s generation- “Buy Now Pay Later”. In the growing number of retailers customers now look for new ways to shop. BNPL plans are basically aimed at the shoppers who impulse buy and limit the purchases to small items. The major user base of BNPL plans is millennials and Gen Z who either don’t have a credit card or don’t choose to use them. Buy now pay later is growing in popularity for all the good reasons as it provides shoppers an option to purchase their needs even if they do not have the funds at the moment but will certainly get it over the next few months.
Understanding the basics of Buy Now, Pay Later
Buy now pay later is a kind of installment loan that lets customers make quick purchases and receive it right away and make the payment later. The installment plan allows the users to divide their purchases into equal payment portions which are interest-free. The easy EMIs make purchasing quite simple, making your pocket afford a pretty lot! These pay later solutions make customers get the products immediately on purchase, making it a preferable option altogether.
According to the stats by Bloomberg Intelligence, currently buy now pay later constitutes up to only 2 percent of all global payments. Though the global sales volumes using BNPL are expected to double and cloud top $181 billion by 2022. To your surprise, BNPL is already adopted by the leading vendors including Klarna, Affirm, and Afterplay reporting year-over-year growth rates of 46 percent, 83 percent, and 104 percent respectively.
Decoding the working of Buy Now, Pay Later
COVID-19 has also played a vital role in spreading the usage and need of BNPL. The major reason here is the financial holdbacks that have forced consumers to choose more flexible and palatable payment options. However, almost nobody ever knew about the plans earlier the outbreak of the pandemic.
Talking about buy now pay later; how does it work, it is basically an installment plan which is adopted by the leading giants including Target, Walmart, and Amazon as well. Customers making use of buy now pay later have a defined set of payment options which are usually interest-free provided paid on time. however, providers might charge interest depending upon the payment amount or the tenure. It just divides the final payment amount into multiple equal installments and provides the customers’ flexibility to make payment in the specified time later.
Factors driving the BNPL Trend for the Millennials
For the generation who require everything at the moment, buy now pay later is the right thing to implement! It started from the headlines stating, “buy now pay later no credit check instant approval” and today is much more than just a credit card alternative! Making the shoppers enlarge their pocket, the trend can be classified as the appropriate fix to the generation looking for instant things. Following are the factors that drive the Gen Z and millennials –
Millennials have been hit by the economic environment wherein there’s a huge demand for flexible financing options. So, similar to subscription-based services, the BNPL solutions provide them with a better sense of control and predictability.
Millennials are also driven by values and sustainability, this sort of payment option allows the shoppers to buy less but purchase the best one and spend more to buy less as well.
BNPL is generally considered more transparent than credit cards, why? It is because credit cards are generally seen as having some hidden costs and complex terms and conditions but buy now pay later seems quite transparent on the contrary.
Buy Now, Pay Later Plans blended with Loyalty Programs
Today, companies are providing buy now, pay later, and have started blending their services through loyalty programs. These providers when implementing a rewards program have two options to start with –
- The first option is to encourage purchases done through BNPL by providing customers’ points while they shop with a particular brand. For making this possible, BNPL providers can offer the members with huge benefits including exclusive online and offline sales, or shopping experiences right from the leading brands like Starbucks, Samsung, Nike, and many more. Customers have a chance to earn more profits if they’re a part of the loyalty network.
- Another option is to reward limited customers who spend responsibly and are eligible for on-time payments. For encouraging such kind of behavior, members can earn points once their payments are completed and paid on schedule.
How’s BNPL the game-changer in Loyalty for Financial Institutions
Everything needs advancement so does the financial industry! With the new trend in power, BNPL is providing opportunities to the banks to walk along with the advancements and keep on shifting their strategies, offering new payment options to their customers. Here, banks can ensure that their customers do not hop out when it comes to using credit cards. Along with providing amazing service and incentivizing engagement through loyalty programs can further facilitate in maintaining a strong ongoing relationship with customers.
Feeling short of ideas to keep the customers hitched to the credit cards? We got you covered!
- One can offer 1 percent cashback on all purchases.
- Provide points for each transaction that can be exchanged for rewards chosen or preferred by the customers.
- Offer instant rewards while customers make a purchase or allow points spent on rewards right after the transactions.
- Can provide bonus points promotions for selected or limited transaction types.
- Encourage spending in the categories which aren’t covered under BNPL like fuel filling.
It’s time for raising the bar on revenues and loyalty with Buy Now, Pay Later Solutions! As the world is moving towards a larger shift in terms of loyalty solutions and multiple payment methods which are not just convenient but flexible and financially supportive too, it’s the right time to implement the buy now pay later option. Curious enough? Get started with the new trend in power!