Small business owners and online shoppers alike have probably heard of the Buy Now, Pay Later scheme already. After all, it has created various opportunities to address the plethora of consumer problems that this current global health crisis is leaving in its wake.
For one, this can provide easy access to services and products for small business owners. A caveat, however, is the substantial fees that usually come with the offer.
Read this article as a quick guide about the pertinent information needed about BNPL, and see what factors and considerations small business owners like you must consider.
How buy now, pay later (BNPL) works
Buy Now Pay Later is a scheme that allows customers to get instant, short-term loans to procure certain services and goods without the need to pay full price yet.
Usually, one payment upfront一normally 25% of the total costs done to secure the loan. Then follows a series of smaller payments.
What actually happens is that the purchases done through this scheme are already paid in full by the POS partner or lending company. It is the customer’s responsibility afterward to repay the remaining balance over a set period and a concrete agreement, which is what the installments are for.
BNPL is also sometimes referred to as ‘point of sale’ installment loans. Used primarily in e-commerce, BNPL has extended its reach by offering in-store financing options to physical retailers.
Lastly, an important thing to note is that the lending company will be responsible for everything. This includes repayment, collections, and other processes. That way, you won’t have to worry about anything else other than running your business.
Benefits for small business owners
It helps your customers to make big purchases
Big-ticket items can easily be purchased through BNPL payment options. There is no need for your present and potential customers to save up money for a long time just to get the needed items.
With the procurement of these items through BNPL, anticipate sales increases. There is also an expected decline in customers who often hesitate to buy what’s on their online carts.
Another thing to note is that customers are normally appreciative of BNPL’s flexibility upon checkout. With this, keep in mind that to improve efficiency at work when dealing with BNPL, unique packages and offered rates must be thoroughly reviewed before crafting and establishing a partnership with known BNPL lenders.
Its integrated setup for business is straightforward
Those also accustomed to debit and credit cards as accepted payment methods will also find BNPL integration straightforward. Its efficiency will depend on two main factors, however. First, it will depend on the features that your POS partner provides.
Second, you should also check the setup of your business’ checkout page. Priorities working with a partner that offers a seamless integration process. This makes it easy for businesses to have an additional payment mode.
It is normally free from interest
Compared to the use of credit cards, a critical feature of BNPL is how interest is not typically accrued. Instead, it breaks out over a set timeline.
Even if this can be done with the use of credit cards, having a more extended period will lead to more interest accrued in spite of earning credit card points. Thus, BNPL is more beneficial for both business owners and buyers alike.
Some even go as far as saying that this payment scheme can help to make extra money.
It helps you reach a larger customer base
Sadly, the reality is that a lot of potential customers do not have high levels of income or have poor credit profiles. This renders them ineligible for credit cards or approval for buying credit products from various lenders.
BNPL provides more possibilities to these types of customers that will, therefore, increase the sales of small business owners like you.
This is due to their ability to make purchases no longer limited to credit card ownership, especially for bigger items.
It has finite payment periods
Another advantage for small business owners is having finite payoff periods. The agreement stimulates this.
Credit card usage normally has longer payback periods. Unfortunately, this can also slow your profit down.
BNPL schemes are recommended instead, through the use of point-of-sale lending software. In this way, expect these purchases paid off promptly and ensure more financial security.
It presents zero risks
Speaking of financial security, because the accountability of payments lies on the BNPL providers, small business owners receive payment in full immediately. To ensure financial security and expand customer payment options, some small business owners have also explored the benefits of high-yield savings accounts for their earnings. For those looking for competitive interest rates, a Western Alliance savings account offers a noteworthy option to strengthen your business’s financial health. This approach not only helps in managing BNPL proceeds but also secures a reliable reserve for business continuity.
One also has no need of going through inventory payback schedules and other math equations needed.
As a small business owner, one enjoys zero credit risk and the payment in one’s saving bank account is secured.
There are only a few services that can offer such benefits and peace of mind.
BNPL: disadvantageous?
Given the advantages listed above, there are still some business owners who do not subscribe to the benefits presented by BNPL. Some believe that while it is largely beneficial for business owners, that might not be the case for the average consumer.
Consumer supporters blame the programs for encouraging consumers to take on debt they cannot afford. BNPL loans may worsen the problem for people who are already struggling to pay their obligations.
Still, this is something that can be managed with proper planning and partnerships between small business owners and POS providers. With the right partner, you can even help lessen the burden of your customer’s debt by providing zero-interest rates and more flexible payment terms compared to mainstream financial institutions.
Our verdict? Although there are a lot of controversies, buy now, pay later options seem to be a permanent fixture on the retail landscape. They offer consumers a better alternative to credit cards.
Be bold with business, through BNPL
All in all, the benefits of BNPL outweigh the disadvantages mentioned above. We view it as a way to improve the purchasing power and the quality of life that our customers have.
If you’re interested in providing this kind of value to your loyal patrons, then you will be pleased to learn that there is a lot of technology readily available to implement this today. There are a lot of lending and POS-focused companies that ensure seamless point-of-sale online transactions among the platform, the customer, and the small business owner.
Perhaps more impressive with how designers create BNPL tech moving forward? How BNPL conducts real-time checks. KYC features, anti-money laundering, and affordability are being plugged into the tech as well.
BNPL-compliant tech can even help small business owners have a profiling system for customers.
Again, as small business owners, you have more to gain with Buy Now, Pay Later. It is definitely something that we believe small business owners should consider. Not only to improve their revenue but also their customer’s user experience.
