It’s no secret. Today’s economy is tough for consumers.
Between surging inflation and climbing interest rates, customers are faced with a difficult choice: either go further into credit card debt (if they can get approved for a credit card) or pull back on spending, oftentimes forgoing essential household needs.
Unexpected car repairs, special splurges, pricey appliances and more — they’re all big-ticket expenses that customers may need to cover even when they don’t have all of the money up front.
But thankfully, that’s not the end of the story.
From new tires to bloated medical bills and everything in between, buy now pay later services (BNPL) give consumers a way to handle those costs over time and get around the ultimatum of debt or denial.
The popularity of alternative financing is growing fast. And as an ISV, you have a golden opportunity to help your clients win more business and gain loyal customers by adding a buy now pay later option to their fintech stacks.
Keep reading for our guide to everything your small business clients need to know about BNPL and how it can boost their bottom line with bigger and better sales.
A quick BNPL Q&A
If your clients are interested in BNPL but have some questions, they’re not alone. Here are a few of the most common questions — and answers — to help clear up the confusion:
How does BNPL work?
Buy now pay later works exactly how it sounds: The customer buys an item or service “now” and pays it off later.
Whether in-store or online, BNPL lets customers pay a percentage of the total cost up front at the time of purchase (like a down payment) and pay for the rest via scheduled installments over the course of a few weeks or months.
The best part? Merchants receive the full amount up front from the lending company, allowing them to increase cash flow while giving customers the flexibility to pay their way with weekly or monthly payments.
What makes BNPL different from other loan or credit options?
While this might sound a lot like credit card purchasing or traditional loans, there are some big differences.
BNPL helps consumers work with banks to create a short-term payment plan with transparent loan options they can quickly and easily qualify for. BNPL loans also typically have low interest rates or offer entirely interest-free installments — and they have a reputation for not hitting customers with hidden fees.
This means customers get the flexibility of credit and the benefits of loans without fast-growing debt from late fees or the stress of meeting strict qualifying criteria.
In fact, BNPL has become so attractive to consumers who are trying to get out of or avoid going into credit card debt that 38% of users plan to eventually replace their credit cards with BNPL. It’s an alternative that alleviates the squeeze on their spending power in a way that won’t come back to bite them.
How big of a player is BNPL?
During the pandemic, BNPL achieved record growth as customers leaned on alternative financing to make purchases in the face of low bank account balances, rising interest rates and lenders shutting their doors. But even though the economy isn’t as dire as it was in 2020, the payment method’s popularity hasn’t suffered.
Living up to its projection as a 2022 trend to watch, BNPL has seemingly graduated from fad to staple with 60% of consumers reporting BNPL usage. In 2022, BNPL users in the US are expected to hit 79 million. And by 2026, BNPL is projected to make up nearly a quarter of all global ecommerce transactions.
From car dealerships to dental practices, it looks like BNPL is going to be part of the future of payments.
The top 5 benefits of BNPL
Now that we’ve covered the basics, it’s time to address the big question: Why should your clients adopt BNPL services for their business?
We’ve compiled a list of the top five BNPL benefits below:
1. It builds customer loyalty: With so many people living paycheck to paycheck and 46% of customers unable to access traditional credit, the need for alternative financing options goes beyond big-ticket items. Individuals and families alike are having a hard time simply purchasing things they need like AC units, engine repairs and medical treatments. And there’s no sign of that changing: 70% of consumers plan to pull back on retail purchases for the upcoming year.
So what does that mean for your clients? As inflation grows and purchasing power shrinks, BNPL offers a much-needed financial lifeline for purchases big and small.
More than helping to win back sales that would otherwise be lost, (though that is certainly a big benefit for merchants) offering installment payments also fosters a better experience for the customer that won’t go unnoticed. PYMNTS research found that 43% of customers had a better experience when they used BNPL. That’s a strong case for building loyalty — and repeat purchases.
2. It brings in higher revenue: Not only does BNPL help recoup standard sales, but it also enables customers to make more frequent purchases with higher price tags. According to recent research, 41% of US merchants found that their overall sales increased after they implemented BNPL, 33% saw higher-value transactions and 30% saw higher online sales conversion.
Wondering exactly how much those sales increased in number and value? Largely thanks to the convenience and flexibility of BNPL, it’s proven to create a 17% increase in incremental sales and a 15% increase in average order value. If your clients are looking for ways to boost sales, BNPL could be the bump they need.
3. It appeals to younger age groups: A recent study shows that 55.1% of Gen Zers and 48.6% of millennials will make a BNPL payment at least once in 2022. That's in comparison to an estimated 31.2% for Gen X and just 16.3% for baby boomers.
With student debt, a tough economy and the pressure to establish themselves financially, it’s not hard to see why this alternative is so attractive to younger generations.
Especially for those consumers who don't have the income or credit history needed to get a credit card, giving them the ability to step into more purchasing power with BNPL will go a long way in helping your clients turn casual browsers into lifelong customers. And it can even help them build up their credit scores at the same time.
4. It provides a competitive edge: This one’s simple. Consumers will go elsewhere if your client doesn’t offer the variety of payment options they’re looking for. An Afterpay poll showed that if BNPL wasn’t available, 57% of consumers would search for another business that did offer the option.
On top of that, according to a PYMTS poll, half of consumers say they’ll switch brands to save money, proving that with the challenges of the current economic climate, even short-term solutions for budgeting and cutting costs are top of mind. The bottom line — if your clients don’t match what competitors are offering, they could lose out on serious business.
5. It makes healthcare more accessible: For your doctors, dentists and vets in the healthcare space, BNPL could play the biggest role of all. Research shows that roughly 21% of customers choose to go without medical care because costs are just too high.
BNPL offers a way to bring a new wave of flexibility and affordability to the healthcare arena that customers have a proven appetite for. Here’s what we mean: While about half of consumers are interested in taking on a payment installment plan to pay for out-of-pocket costs, only a third have actually been offered that option.
Beyond bringing in patients for baseline care, BNPL also makes elective procedures possible. It’s a win-win: More patients get the care they’re missing and healthcare professionals get more business.
Looking for a solution? Meet Delay Pay
After you’ve answered your clients’ questions about BNPL and briefed them on the benefits, the next step is connecting them to a solution they can trust.
Good thing you’re already in the right place. Global Payments Integrated offers an integrated BNPL solution for ISVs and their merchants that’s instant, easy and secure: Delay Pay, powered by Tua*. Online or in person, our alternative financing solution works for multiple selling scenarios and verticals to give customers more ways to pay and boost merchants’ revenue.
For ISVs, all it takes is a simple integration to equip your clients with BNPL for their ecommerce store or point of sale system — all without the time and cost of having to manage multiple providers.
Here's how it works:
- The consumer selects the option at checkout to delay their payment and fills out an application that only requires a few data points for a real-time decision.
- Once they’re approved, they accept the loan that works best for them and enter into a transparent payment schedule to repay it.
- At that point, the payment goes through in full and the merchant receives the funds directly from the lending broker, with no further involvement in the repayment arrangement.
It’s that simple.
Delay Pay also offers more intuitive features like pre-approval with a QR code and different types of loan models for customers to choose from. Best of all, merchants get all of the benefits with none of the risk: Your clients won’t bear any of the liability for the loan amount or responsibility for loan repayment.
Contact us today to learn more about how you can turn your small business clients into heroes for their customers with Delay Pay.
*Global Payments Integrated is not a consumer lending company. Delay Pay is powered by Tua, a consumer financing solution that pays merchants upfront and allows consumers to pay over time.