Buy Now, Pay Later (BNPL) is a recent trend that has been popular with online retailers and shoppers alike . Though the feature is new to the ecommerce sector, the principle is very simple and has been around for quite some time. Customers looking to make a purchase can simply choose from installment plans that fit their finances. A new generation of fintech companies such as Affirm, Klarna and Afterpay is powering this alternative credit approach.
Many people during the Great Depression hesitated to spend a lot of money, so retailers began offering “layaway” to encourage larger purchases. Instead of just buying the radio outright, customers would first make a down payment and have the store place the product “on layaway” (preparing it to be returned later when the customer pays off the full amount).
In the 1980s, credit cards became more prevalent, and this caused layaway to lose favor. Credit enabled many more people to pay full price for high-ticket items without having to wait for billing cycles to conclude, which meant they could immediately pay off their credit card balance plus interest. But, while we made progress, we ignored a large portion of the population who either couldn't qualify for a card or simply did not want one because of the penalties and high interest rates. New payment methods that are attractive to both buyers and sellers are available in several financial technology (fintech) companies.
How Does It Work?
Each BNPL service is bit different and has unique benefits, but basically:
You set up a new Buy Now Pay Later payment gateway.
The shopper selects the BNPL payment method at checkout.
They may choose to delay payment, establish a line of credit, break the payment into installments, or request financing, depending on the services you offer.
You receive payment in full for the order and fulfill it like any other paid order.
Similar to other payment gateways, the BNPL company charges you (the merchant) a fee for the service. This may be a flat fee, a percentage of the transaction, or a negotiated rate, depending on the service used.
No matter what happens between the buyer and the BNPL service, you (the merchant) are paid in full immediately. The BNPL company assumes the risk.
Typically, BNPL has the most value when selling “high-ticket” products and services. It’s important to understand that this term is relative to your industry.
Retailers of “luxury” items are a good fit, like:
Designer Home Goods
Stores with a high Average Order Value (AOV) should all have a BNPL option, like:
Home & Office Appliances
Interior Design Furnishings
Consumer and Professional Electronics
Computers, A/V, Game Consoles, Customization Services, PC Builders
Musical Instruments and Equipment
Services Available Through BigCommerce
BigCommerce is a headless ecommerce platform built for performance with a ton of extensions available to customize your offer. As a BigCommerce merchant you have the option to select a buy now, pay later option that will work for you and your customers. A few of the companies that offer this fintech service to BigCommerce merchants include Affirm, PayPal, Klarna and AfterPay.
This payment gateway is available for US, Australia, and New Zealand stores. AfterPay gives your shopper the ability to break their payment up into four equal installments due every two weeks. They pay 25% today, another 25% a week from now, and so forth. For what it lacks in flexibility (there are no other installment plans), it makes up for in simplicity. Shoppers like AfterPay for its convenience and easy to understand terms. You can also customize your store’s theme to promote your AfterPay availability.
This payment gateway works to complement your existing gateways by offering pay later, financing, and installment options (interest-free installments only available to US shoppers). Klarna is available in the US, UK, and several European countries.
This payment method allows US stores to offer shoppers flexible financing plans.
For example, Affirm might show three different options for the same purchase:
$78.38/mo for 6 months / 15% APR interest = $22.68
$40.68/mo for 12 months / 15% APR interest = $38.16
$28.07/mo for 18 months / 15% APR interest = $55.32
Shoppers like it because they have more control over the terms and appreciate the transparency regarding the amount of interest being charged.
Affirm also offers a free app that adds promotional messaging to your site and allows you to use Affirm’s enhanced analytics tools.
Buy Now Pay Later with PayPal
If your store is already using PayPal Express Checkout or PayPal powered by Braintree, you can also easily offer PayPal Credit. The customer must have a PayPal account, and PayPal will provide them with a digital line of credit based on the customer’s credit history.
In BigCommerce, they make it easy to enable your store’s PayPal Credit availability. All you have to do flip some switches in your PPEC or PPpbBT settings.
Setting up Buy Now Pay Later For Your Store
When choosing a fintech service to work with you should carefully review the terms and conditions they expect you and your customer to review. Compare pricing, payment options and contract lengths of the major providers to find a solution that works for you.
Installation of a Buy Now Pay Later service can be as simple as flipping a switch in some instances while other require some developer intervention. If you would like to implement a payment solution for your eCommerce site contact me here or by phone/chat/email and I will be happy to review your options.
I am BigCommerce Developer Partner and a Shopify Professional Developer however I am more than happy to integrate services into any platform including custom integrations. Contact me here.