Why “Buy Now, Pay Later” payments actually make the most sense

Oftentimes, when making a large purchase, the option to pay in installments usually comes into play. Known as the “Buy Now, Pay Later” (BNPL) purchasing method, this is a fast-growing option among retailers to date. 

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With BNPL purchases, your payments are typically split evenly between a set amount of months. These loans usually remain interest-free unless, of course, you aren’t making your payments on time or in full. Merchants that offer BNPL rates are quick to see lower cart abandonment rates and higher average order values. This is especially handy for those who need to make hefty purchases but don’t have the money readily available; BNPL gives consumers the option to receive their items without paying immediately. 

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So what exactly is the difference between BNPL loans offered and those from third parties? Well, for starters, the BNPL option isn’t offered before making the purchase but they will appear as an option on qualifying purchases from your statement. It’s convenient because the offer comes after you’ve made the purchase, meaning you don’t have to decide far in advance whether or not you want to split up the payments.

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While the BNPL concept itself is still relatively new, brands and consumers have been diving head-first into it, soaking the offer any chance they get. As the cost of everything goes up, this option is most appealing for younger, convenience-driven consumers. This is perfect; consumers who may have otherwise shelled plans to buy things or travel are now able to finance what they want, when they want it.

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Early BNPL fintech firms, like Klarna and Afterpay, are relishing in success after prompting new retailers and brands to enter the field. Because of that, the BNPL payment plan is accelerating and expanding as we speak. Traditionally, it was always difficult to access loans with few barriers. While traditional layaway plans offer financial benefits, it’s nothing short of jumping through hurdles to achieve them. Even Apple has since joined the BNPL landscape, offering financing options for purchases made via Apple Pay. While this is set to hit the market this fall, it’s clear that most companies are looking to hop on the BNPL bandwagon sooner rather than later. 

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Retail chains also benefit from this newer method of payment. The BNPL process provides many with access to credit they don’t have; it also enhances repeat purchase rates and increases basket sizes (AOVs). Additionally, due to the surge of online shopping and e-commerce rates fluctuating during the peak of the COVID-19 pandemic, we could see as many as 30 per cent of digital shoppers using the BNPL method by 2026.

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As it stands, BNPL seems perfectly positioned for continued growth. With new providers entering the field, the BNPL capabilities are becoming advanced, appealing to consumers across the spectrum.With a completely different risk profile than that of a credit card or traditional loan, BNPL programs could be the difference between a user emptying out their shopping car, or completing their long-anticipated purchase. 

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