Must you add "Purchase Now" and "Pay Later" choices to your ecommerce website?
There have never been so many ways to pay online as there are today. It has never been more important to make sure you are offering your consumers the option they prefer.
For some, this could be a long-trusted Visa or Mastercard. Others may prefer Apple Pay, PayPal, or another digital wallet. Increasingly, consumers are choosing to buy now and pay for solutions later when they check out.
But what is this payment solution? And is it time you buy now and pay later on your website? Read on to get my views on the subject.
What is Buy Now, Pay Later?
The name says it all. With “Buy Now, Pay Later” consumers can literally buy a product and have it delivered while delaying payment until a later date.
This option is very similar to the old school method where consumers can reserve an item in stores and cash it out in installments. Once all payments have been made, you can take the item home with you.
Buy now, pay later offers an even more consumer-friendly alternative to laypeople. You don't have to wait to access the item for it to pay off in full. Consumers just have to wait for their item to get to their doorstep.
You have probably seen yourself shop now and later checkout for payment options in many of the places you shop. The Leesa mattress company works with Affirm. Anthropologie works with Klarna. Sezzle works with Bodega.
Unlike laypeople, consumers do not necessarily use "buy now" but pay later to finance expensive purchases. They use the payment method to buy all sorts of things from everyday necessities like clothes and housewares to items with big tickets like fitness equipment.
While there are multiple ways to buy now and pay later, they all offer broadly the same thing. The consumer can make repayments within 14 to 30 days or in several installments (usually between two and four) or in full. If you don't pay there is usually a fee, but not always.
One of the reasons that buy now, pay later solutions are so popular is because they provide easier access to credit for consumers. Unlike credit cards, which require users to pass a lot of information and pass a strict credit check, buy now and pay later. Vendors only ask for a consumer's name, email address, date of birth and billing address.
The solutions also reflect the buying habits of young consumers who are more likely to buy a selection of items, try them out at home, and then return the items they don't want. Returns are often easier to manage and less stressful when you buy now and pay later because consumers don't pay for the products at all.
6 reasons to add "Buy Now" and "Pay Later" to your ecommerce website!
It's not just consumers who like to buy now and pay for solutions later. There is also a lot to like from a shop owner's point of view.
Here are six benefits that you can buy now and pay for later.
Potential sales increase with Buy Now, Pay Later
If you allow consumers to distribute payments, they may be more likely to make a purchase. Consumers don't even need to have the money in their accounts to buy your products.
You just have to be confident that you can pay for it in the next few weeks. This is especially useful for tracking consumers with paydays on the horizon.
The increase in conversions can be especially dramatic if your items are more expensive, as consumers may be more willing to buy something more expensive than if they could break the payment into manageable parts.
Buy now, pay later, can attract new customers
More and more consumers are choosing this payment option. Even if they have the money with their banks, there is little disadvantage in distributing the payments if they are not charged interest.
That means some consumers may be actively looking for stores that offer their favorite purchase now and pay for options later. Given that many buy now and pay later, providers offer lists of where the service can be used. Some, like Klarna, even have apps that consumers can use to shop online directly from them.
Buy now, pay later could build confidence
It used to be almost impossible to get a trial period for many consumer goods, but buying now, paying later often makes it possible. By purchasing via an buy-it-now and a later payment solution, consumers can test your product without having to make a purchase.
If you like it, you can pay as usual. If not, they can return it without worrying about a full refund as they haven't spent much, if anything, yet.
A small increase in free returns can cost you more in the short term, but the long term benefits of increased customer loyalty can be significant.
Customers may see that you have enough confidence in your products to risk the possibility of a return and trust them enough to use their own good judgment without asking the questions they might get in stores.
You can reduce cart abandonment by buying now and paying later
According to the Baymard Institute, around 6% of abandoned cars are due to a lack of payment options. As you increase payment options by including a “Buy Now” and “Pay Later” solution, your abandonment rates may decrease.
But that's not all.
Buying now, pay later can also make your checkout process a lot smoother. Consumers do not need to enter card details or a billing address. All you have to do is log in with your Klarna or Affirm account. This fact is important as 28% abandoned their shopping carts because they did not want to create an account and 17% did not trust the websites with their information.
Your competitors may already be using Buy Now, Pay Later
If your competitors haven't made at least one purchase now, pay for a later solution into their checkout. Chances are they will soon. Research shows that a third of US-based ecommerce stores plan to incorporate a purchase finance option in the next year or two.
If you don't keep up with consumer demands, you will inevitably lose customers to competitors who keep up.
Buy now, pay later can provide consumers with a better credit solution
The fact is, buy now, pay later is a much cheaper financing solution than credit cards for many consumers. Not only that, they are often a much safer form of debt than credit cards or payday loans.
The former can have double-digit rates while the latter can drive you into a debt spiral. And when your customers need them to pay for things, they may be reluctant to make purchases at all, or get into a financial situation where they cannot become a regular.
You may worry about selling to customers who can't afford the products upfront, but don't worry: like credit cards, buy now, pay later, companies pay you when the transaction is complete, and it's up to them not to pay customers.
3 Reasons Not To Buy Now, Pay Later On Your Ecommerce Website
Buy Now, Pay Later Tools are not for everyone. As a consumer finance solution, there are a few things you need to consider.
Buy Now, Pay Later Services often have higher fees
There are costs for the increased conversion rates, and new customers who buy now and pay later can incur costs. They come in the form of higher fees. Klarna, for example, charges a fee of $ 0.30 and a variable fee of up to 5.99%. That is significantly more than with almost all Visa and Mastercard payment gateways.
It's not just the higher fees that you need to worry about. There's also the opportunity cost of listing another payment solution. Every time consumers use one option to buy now and pay later, they choose not to use any other payment option with lower fees.
Buy now, pay later could fuel consumer debt
While buy now, pay later, solutions are being marketed as consumer-friendly financial products. Some critics believe that they are just another way to get consumers to take on more debt than they need to be.
This applies whether you sell t-shirts for $ 10 per pop or mattresses for $ 1,000. Buy Now, Pay Later encourages consumers to enter into credit agreements with third parties even if they can already afford to pay for the product in cash.
You could risk your reputation buying now and paying later. Problems arise
Due to the above problems, buy now, pay later, solutions have received a lot of negative media coverage. Given the value they offer to some consumers, there is every chance these solutions will see positive reviews in the future – but only time will tell.
As negative media coverage of these solutions increases and public opinion turns against these options, brands that facilitated these payments can become targets.
However, this coverage could go away or improve as people get used to these products. So there is something to be aware of, but not necessarily something to panic about.
Best Buy Now, Pay Later Tools
The competition when buying now, paying later space is tough and growing. That means consumers have more options. You probably want to consider making more than one purchase now and paying later to keep consumers happy.
Here are some of the leading players to consider adding to your bankroll.
Klarna
Klarna is a Swedish bank and one of the most famous players in the market for instant purchases and payments afterwards. She works with thousands of companies in nearly 20 countries. The platform offers users two ways to make repayments: "Slice It" and "Pay Later".
With Slice It, consumers pay for purchases in four installments over six weeks. In the case of later payment, consumers will receive an invoice for the full amount after 30 days. The payments are interest-free for qualified consumers. Brands that use Klarna include Uniqlo, H&M, and Anthropologie.
To confirm
Affirm is designed to help consumers finance purchases of all sizes. It supports small, everyday purchases like the rest of the solutions on this list, with interest-free payments spread over weeks or months.
It also helps consumers make major purchases or needs like car repairs with interest-bearing loans over a period of six to 18 months. How long consumers distribute the payments is up to them.
Affirm also does not charge any fees, including late fees and repayment fees. There is also no charge for opening or closing an account. Brands that use Affirm include Peloton, Walmart, and adidas.
Quadpay
Quadpay allows consumers to split purchases into four installments that are paid for over six weeks when shopping online or in-store. Approval is immediate and is done using soft credit checks.
Shop owners don't need to install Quadpay at their checkouts. The payment tool is available wherever Visa is accepted as the company provides users with their own Quadpay Visa card numbers.
All your customers have to do is select the merchant and enter the purchase amount – Quadpay will take care of everything else.
Sezzle
With Sezzle, consumers can split purchases into four interest-free payments that are due over a six-week period. There are no fees for consumers to pay on time and there is no impact on their creditworthiness.
Sezzle works with over 24,000 stores, including Brandless, YoungLA and GHOST, and integrates with all leading e-commerce platforms.
additional payment
With Afterpay, consumers can make interest-free purchases and repay the amount with four equal payments that are due every two weeks. If consumers miss a payment, Afterpay will charge them $ 10. An additional $ 7 will be charged if payment is not made within a week.
Afterpay differs from some of the lenders on this list in that it approves users for each purchase rather than approving an account. The company has stated that its algorithm has been programmed to give preference to users who have previously used the service and paid for on time. Participating brands include Jimmy Choo, Lululemon and UGG.
Conclusion
It is important to provide as many payment options as possible and give your consumers the choice they prefer. Integrating a solution to buy now and pay later can drive more sales, lower cart abandonment rates, and build trust.
You also need to consider cons, like the higher prices that come with buying now and paying options later.
Are you adding a purchase to your website now, paying for a solution later, and if so, which one?