Buy Now, Pay Later, or most commonly referred to as BNPL, is one payment method where a customer makes a purchase and allows them to spread the cost of their purchases over a fixed period of time, without the need to pay for any interest. The customer usually either pays for one installment at the moment of purchase, or pays for the first installment a month after purchase.
While the customer pays their installment balance over an already decided period of time, the businesses are paid the full amount during the time of purchase. Commonly, a Buy Now, Pay Later mode of payment is seen in retail stores, but can actually be used by any other industry business that chooses to use them.
Buy Now, Pay Later in UK: How does it work?
Similar to the interest-free promos and offers by a lot of UK business retailers where they allow the delay of payment of the customers with their purchases. The main difference here is that a Buy Now, Pay Later payment option has a third party involved and that makes all the difference in the world.
Buy Now, Pay Later providers charge a small fee from transactions, and this is how the providers are compensated. A lot of businesses offering this payment option are actually happy to shoulder or pay this fee as this payment option removes one of the big barriers there is when closing an actual transaction: being able to afford it at the moment.
While the Buy Now, Pay Later options are interest free, these platforms make money by having late payment fees. Repayments are done by way of automatically deducting the said amount from an account that was given by the customer or a card, if and when the fees are insufficient the customer automatically is charged a late payment fee. The fees here range from $2 to $12, but there are other companies that can actually charge a lot higher late payment fees.
5 Benefits of the Buy Now, Pay Later payment options for Businesses
1. Increased Sales
A business offering a Buy Now, Pay Later payment option will find that most customers will feel more comfortable making large purchases than usual for the reason that the total cost of all of the items purchased can be spread over an installment period. Customers that will be using the Buy Now, Pay Later payment option tend to buy a lot more stuff all at once because the cost of all the purchased items initially is low.
2. Makes the business competitive
Buy Now, Pay Later services are becoming more and more common by the day, as such, businesses offering this kind of payment option ensures the business that it is keeping up with other businesses in competition inside its industry.
3. Gets rid of outstanding invoices
No more shall the business worry about outstanding invoices that they would still need to run after. With the Buy Now, Pay Later payment option, the business will get paid at the time of purchase, thus there is no risk of not being paid in time at all.
4. It can apply to businesses as well
Small businesses can also choose to pay using the Buy Now, Pay Later option. This can come in handy if the business wants to make a purchase and would rather not use their existing credit lines can opt to choose to pay using the Buy Now, Pay Later option.
5. The business creates a seamless buying experience for their customers
Because of the pandemic, a lot of customers now prefer seamless payment transactions and with Buy Now, Pay Later payment options, the business can be able to create another seamless payment option for their customers.