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#Few Things Merchants Should Consider Before Offering Buy Now, Pay Later

Few Things Merchants Should Consider Before Offering Buy Now, Pay Later

Buy now pay later has skyrocketed in popularity among its users. Rightfully so, it carries none of the weightage of credit cards yet all of its good qualities. FOr the younger generation struggling with finances, BNPL is a brilliant alternative.

However, for Merchants, BNPL might be daunting. With its growing popularity, it would be a good idea to through incorporate buy now pay later Shopify or afterpay among other such options into the eCommerce sites, but it is still smart to look into the risks and benefits. BNPL is a scheme made for the customers, yet it does benefit merchants greatly too.

To begin with, the question is what is BNPL?

Buy Now Pay Later is a scheme that allows customers to buy products at once and to pay for them over fixed installments as decided over time. The growing benefit is that it does so without charging interest. While the customers get the freedom to pay the price over a period, usually four installments, the merchants are paid the full fees without the transaction fees. The BNPL service is then paid the amount by the customer.

It is easy to implement the Buy Now, Pay Later into your own account- however, the popularity of third-party BNPL services gives better management chances.

Types on BNPL for Merchants

There are two plans for BNPL that merchants should be aware of: Merchant transaction fee loans and shopper interest loans. While one is a customer-focused plan, the other benefits merchants.

Merchant Transaction Fee Loans

This is one of the popular options that more people know about. In this case, a loan is made to the customer. They use BNPL without any interest fee and have to pay in installments. Only if they delay their payments do they have to pay the interest.

On the other hand, the merchants have to 2-8% of the total amount and in some cases, the transaction fees.

This is a popular plan among the customers since it allows for a fixed amount over the period.

Shopper Interest Loans

In this case, merchants do not have to pay any interest to BNPL services. However, the customer has to pay interest when paying their installments. While this is an amazing plan for merchants, customers often shy away due to the interest they are charged.

In both cases, there is a way to pay back the service provider. While one is designed for the merchants, it is the Merchant Transaction Fee pans plan which attracts customers more to any business.

Buy Now, Pay Later Benefits

While it may seem somewhat contradictory, buy now pay later presents a very simple idea for the younger generation. By knowing that they can pay in installments, they would be attracted towards the buying more. WIthout the daunting credit card interest and a fixed amount to go out through their pockets, BNPL allows a way to purchase necessary items without any of the fanfare.

With the ease of installments also comes a larger number of customers. The knowledge that they do not have to pay the full amount immediately attracts people into the system. The hesitation that often surrounds the purchase of a large amount can be lowered significantly.

BNPL definitely enhances the checkout experiences for many customers. By clearly communicating the role, merchants can have an easier time shifting from traditional methods of payment to BNPL. However, it is important to communicate the changes clearly.

By all means, BNPL is a way to attract more customers. It can increase sales as well as performance.

Buy Now, Pay Later frauds

While BNPL is a relatively safer option, it does come with its own pitfalls. One of the prevalent BNPL frauds is account takeover. By hacking into the victim’s account, the fraud might be able to purchase items and due to its installment-driven plans, it might take the parties some time to realize what is happening.

While service providers usually take full liability for this condition, the blame does fall upon the merchants, even if unnecessarily. Thus, it is wise to check the warning signs of fraud, such as a change in the shipping address and too many purchases made too close by.

The anti-fraud network and defenses need to be updated by the merchants as well as the BNPL providers. The evolving cyber threats are possibly the biggest concern in the BNPL world for fraud right now.

Buy Now, Pay Later risks

With all its benefits comes a few risks. To begin with, BNPL does not always do affordability checks. What this means for merchants is that there may be people who may not be able to afford the items they purchase under the BNPL scheme. With the late interest and growing price, it might get more difficult to pay back the installments.

Often, the people who do sign up for the BNPL scheme have little to no idea what they are doing. While at the outset it sounds like a wonderful idea, there are terms and conditions that come attached with it. As a result, it gets difficult later on when the customers realize that there is more to BNPL.

People who lack financial stability or cannot continue to pay over a period of time can be put into a difficult position here. As for merchants, this can create a problem in the longer run.

Similarly, since BNPL is a growing community as of now, the companies which offer the services might go into loss. It is important to understand that BNPL demands rise during the holidays. While the companies might soon change their model, it may not be a long-term commitment for the merchants.

There is a lack of regulation within BNPL. As discussed before, there is a chance of fraud and other activities which harm the scheme for merchants as well as providers.

One of the more grounded problems is cross-border payment. Because of the difference in conversion rates, many times overseas customers might find themselves paying more than before due to the rising rates. It is up to the merchants to check these policies of the BNPL provider and make the changes accordingly.

In the end, BNPL is the new way of the new generation. While merchants might see many pitfalls through the process, it is a very good method to attract new customers and boost sales. The options available on different platforms like Shopify, affirm, etc and mega-companies have slowly started to integrate the plans through EMIs. As long as merchants are fully aware of the risks that come with BNPL, there is no reason why they should not tap into the ever-growing market.

Author Bio

Aline Huseby is a Sales & Marketing Manager at ChargeAfter. She would like to share content on Finance Industry like Point of Sales financing, Buy now Pay later, consumer financing & Ecommerce financing for valuable reader.

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