There is no doubt how big the Buy Now, Pay Later market has become in the last few months. With becoming the preferred way of payment for most of Gen Z, BNPL is slowly high rocketing through the roof and allowing people a safe way to purchase items. Businesses and eCommerce websites are constantly using this method to increase sales and traffic.

Amidst all of this, the recent interest, and growing work, it is clear that BNPL is doing something right. Therefore, it has become necessary to outline both the pros and cons of this method. Not only for customers but businesses as well. Here is everything you need to know about these schemes

Benefits for Businesses

While BNPL has been made to cater to an audience, there are benefits that it offers to businesses as well. The BNPL packages are offered by third-party providers, so that gives Businesses a certain kind of freedom. In addition to that, here is what the system offers.

Wider Audience

The main attraction of Buy Now, Pay later is for the audience, as discussed, and this is a great way to attract a larger audience. By diving the payment play over 3 to 6 or even more months, or putting it in smaller brackets of weeks, Businesses and eCommerce sites can attract the attention of a wider audience. This affordable purchase can work for anyone, from students to full-time working people. 

If a company can implement this system well enough, they may even get recognition due to the Buy Now, pay later schemes. 

Affordable and flexible payments

The merchants who are actually selling the products get full value right at first while the customer gets to pay the amount to the third-party provider with time. This makes sure that the business is much more affordable and easy for the businesses. 

Merchants will be able to sell their products much more easily using the BNPL schemes available to them. Especially for things such as jewelry or electronic devices, Buy Now, pay Later has a good impact on the order conversation.

Higher average order value

The Average Order value or AOV is what the customer pays on average while making a purchase. Statistics show that after merchants implement the Buy Now Pay later method, there is a stark increase of 130% in AOV. This is because the smaller payment increases a customer’s purchasing power. Most people who use BNPL do it to avoid Credit Card interest rates. The other reason why they use it is to purchase products that would usually be out of their budget. Thus, BNPL increases the engagement of customers. 

Better customer experience

As discussed before, Buy now pay later is all about customers. Thus, using the BNPL schemes, people can have a better experience using a company’s features. The power to hold on to their purchases and plan how and when they wnat to pay to make consumers have greater power. This flexible system boosts sales and allows customers to have a much better experience. 

It has been found that the cart Abandonment rate has gone down significantly after a COmpany employs the Buy Now pay later schemes. 

Drawbacks for Businesses

And just like that, there is a flip side to it all. Buy Now Pay Later, made to cater to the needs and wants of the customers, requires something little more from the merchants. In such a case, businesses need to be careful and sure of what they want or need, and if BNPL is something worth investing in.

High merchant fees

More Providers who offer Buy Now, Pay later services place small charges. While customers’ amounts are usually at the time of registration or something skin too late fees, Merchants need to pay a higher amount of fees. This can range from anywhere between 2 to 6% of the purchase that the customer has made. 

Because of this, the merchants may have to work on their own prices and give a percentage to the third-party providers.  

Integration difficulties

In case merchants wnat to employ this scheme directly in their shops, Buy Now Pay later has a lot of additional features and knowledge which are required to include them in the workings of a company. It cannot be easily integrated into a business’ normal checkout process. There are specific tools and technology which are required to install Buy Now Pay Later into a shop, both physical and virtual. 

Most FInancial experts would recommend going with a third-party provider. However, as discussed before, that costs Merchants some amount of fees. 

Even more so, businesses have to meet some criteria to qualify for BNPL schemes. Furthermore, some gaming companies and tobacco companies are not even eligible to apply for this method.

Confusing deals

To be very honest, Buy Now Pay Later is confusing for merchants. Each provider has a different scheme, with different packages and all of them claim to offer the best service. Furthermore, the system is still new. That makes the whole system pretty confusing. 

Furthermore, the terms and conditions of BNPL systems are subject to change and Merchants need to be aware of these changes. They need to understand which rates work the best for them and choose wisely. In fact, any problems with the BNPL system can damage your system and reputation. 

Benefits for Customer

The system has been carefully catered to meet the needs of customers. Therefore, there are enough benefits that a purchaser can enjoy.

Convenient mode of payment

The transaction process with BNPL is extremely easy for the customer. On online eCommerce websites, all they need to do is opt-in with the Buy Now Pay later provider at the checkout and that’s it. The payment plan and everything else will be automatically done by the provider and delivered right to your email ID. 

In some cases, customers do not even have to go the extra step of making an account.  

Interest-Free

The winning point of any BNPL scheme is the fact that it does cost any interest, unlike credit cards. There is no interest on your purchases or on the amount you borrow. The only fees that come up are in cases when a payment is overdue. 

BNPL is a user-friendly payment method.  

Spread out payment plans

From 6 weeks to 6-month plans, BNPL is all about taking time to pay back your dues. Customers do not even have to make their payment plan, because the BNPL providers take care of it. They split the total amount based on your ability to pay and then give you the time limit. 

The amount is automatically deducted from the debit or credit card, as chosen by you. The only thing that the customer needs to keep in mind is that their accounts are never empty.

A good alternative to credit cards

The new generation has seen the market crash of 2008 and the COVID market crash. More and more people are dumping their credit cards instead of working on their debt levels. The point of credit cards was the ability to purchase materials now and pay later in full. Now, BNPL schemes can do that without the additional charges. 

BNPL sticks to your budget. If you have a good idea of what you can afford and what is your limit, BNPL is a very good alternative to Credit Cards. 

Drawbacks for Customers

BNPL arrangements have their disadvantages, even for customers. While it stands high on offering an alternative to credit cards, it doesn’t stop the scheme to have its drawbacks. 

Encouraging Customer debt

Customer debt is a bane for someone who does not have enough to spend. BNPL does not charge anything unless the installments are late. In case anyone is going through financial troubles, they could create trouble for the system.

Because BNPL schemes cover a lot of areas, someone who does not have the financial discipline may fall into a CUstomer debt. This is the personal responsibility of the people. 

Impulse spending

BNPL makes people afford previously impossible things. There is thus a chance that people may spend impulsively and more than they can afford. BNPL enables impulse spending, by telling customers that they can pay later in installments. While it may seem like an amazing chance, it is not. In the end, you are spending the money that you do not have.

Late payment fees

The late payment fees are one of the big sources of revenue for BNPL providers. Just a slight miscalculation can you be in debt with the BNPL companies. These late payment fees can cost anywhere from $10 to $68. In fact, in bigger purchases, this number also just goes up. 

Post-purchase dilemma

In case you decide that what you purchased is not what you wanted, you do not exactly have the choice to return it. Getting a refund would be a nightmare, and in some cases, just impossible. Therefore, using BNPL for purchases that you are yet unsure about is a bad idea. 

Hinders in loans

BNPL does not check your credit score. However, in case you fail to pay your dues on time, BNPL can affect your credit score negatively. BNPL purchases are still an important part of financial life, and banks consider that. In case of any trouble, it could stop you from getting a loan. 

Buy Now, Pay Later began as a great way for Gen Z and Millenials to purchase necessary items. Starting for big purchases, it soon spilled into day-to-day spending. However, as the system grows, it has begun to show both its side for both customers and businesses. Therefore, before using the system, next time, maybe be on the look out for the pros and cons of this arrangement.