The surging popularity of Buy Now – Pay Later has bucked conventional wisdom about traditional installment plans. At the beginning of the BNPL boom in 2022, it was anticipated that Gen X and Gen Z would be the ones using BNPL programs. That proved to be an incorrect forecast as there is a much broader group of customers using these plans. It was assumed that lower-income consumers would likely be the ones to take advantage of BNPL. However, the use of BNPL has been much more prevalent among households earning more than $100,000. As inflation is forcing us all to reexamine how we manage daily, weekly, and monthly finances, providing your customers with a new financing option is critical.
BNPL is a loan offered to customers at the point of sale that allows shoppers to purchase merchandise on credit. Customers have different options for paying off the loan balance, which typically depend on the amount borrowed. Some payment options incur interest, while others do not. BNPL is super easy to use for both merchants and consumers. Very little work is required on the part of either. The consumer simply scans a QR code at the point of sale or elsewhere in the store and seconds later they have a brand new Mastercard account ready for use in your store or business. This encourages customers to spend more money than they planned on spending since they can stretch out their payments over time while enjoying a new item today.
Easy Application Process
Applying for credit has never been easier. Your customer simply scans a QR code on a convenient countertop sign and they are whisked to the application process on their smartphone. There are only two questions asked of an applicant. Using their name and phone number, their application is processed in about the same amount of time it takes to receive an approval on a credit card transaction. That’s about two seconds! The credit check is a soft credit check and that means that there is no inquiry recorded on the consumer’s credit history. This is important since too many inquiries on a credit report can be considered a negative trait. Once the account is approved, a new Mastercard is issued specifically for use with the sponsoring merchant and the transaction continues the same way as any other credit card transaction.
Why Merchants Need BNPL
By offering your customers a BNPL plan you are providing access to instant credit for customers who might not qualify for traditional forms of credit. This can help increase sales through increased spending as well as acquiring new customers since you provide an easy way for them to acquire an item today that they might not otherwise purchase. While an item might be out of their cash-on-hand budget, they are more than willing to pay for it in installments. BNPL plans cause consumers to step up their game plan when it comes to purchasing. As an example, a person shopping for a basic toaster oven might consider purchasing a $40 model but upgrade to a combination toaster oven, air fryer and convection oven that sells for $400 if they know it can be financed in seconds.
Offering a BNPL plan can also help merchants build customer loyalty. Customers are more likely to return to a merchant if they know they can purchase items today and pay for them later. Merchants can also offer discounts to customers who choose to pay for items using a BNPL plan and since their new account comes with an established credit limit for your store, they are likely to return soon as well as promoting your business to their friends. BNPL truly helps merchants increase sales and attract more customers.
Big Ticket Items
BNPL is a great solution for big ticket purchases such as furniture, appliances, seasonal purchases or even unexpected emergency home or auto repairs. Merchants who offer BNPL programs are going to be the first business consumers will call on for these goods or services. BNPL will encourage larger sales since it will be paid for over time.
Looking ahead in 2023, we expect to see a continued growth for BNPL. Despite the high inflation we are experiencing, consumers are still spending money and they will spend even more money if they can pay it back over time.