Buy now pay later: points merchants need to know:- www.deekpay.com

Buy Now Pay Later (BNPL): What Merchants Need to Know

Those who use credit cards will pay the amount owed at a later date after the date of purchase. When used wisely, this line of credit can help us manage our cash flow better. The Buy Now Pay Later (BNPL) credit product is the latest addition to the financial sector and it is already leading the industry.

Under the buy now pay later model, a third-party BNPL provider is responsible for recovering the instalment plans offered to customers. A new entrant in the financial space, buy now pay later apps have captured a share of 3% of the e-commerce market at the end of last year. It is expected that this share could exceed 9% by 2024.

There are several key benefits behind the popularity and bright future of Buy Now Pay Later, so let's explore them.

Benefits of buying now and paying later

BNPL offers more than one benefit to merchants. Here is what we have tried to explore:

Increased sales: For buyers, BNPL companies offer the opportunity to purchase products based on their BNPL credits. The instalment option encourages buyers to purchase products they might otherwise have skipped, resulting in increased conversions and reduced cart abandonment. Broader Audience: Selling online automatically opens the door for merchants to customers whose credit history is not necessarily a barrier to a transaction. Merchants who partner with a BNPL app like PayU can serve potential buyers from all over the world.

Increase in high value sales: BNPL offers a viable option to challenge credit cards for purchasing expensive products. It does not levy high interest rates. The interest rate is competitive after the interest-free period. Buyers can now purchase high value products from merchants through BNPL without worrying about the price.

Average order value increases: an affordable repayment process means they can spread the cost over a period of time. Since they don't have to pay immediately, customers shop more, so the value of their orders increases.

Customer Experience Improvement: Deferred payment accounts offer customers the convenience of digital processes and seamless API integration. Customers who choose to pay through PayU can pay without interest for a limited period of time or repay at a low interest rate.

Bain & Company's study also concluded that merchants have seen an increase in conversions, order value and number of new customers through BNPL as compared to credit card payment options.

Read also: what are the payment gateway fees

Challenges to overcome in buy now pay later (BNPL) applications

There are a number of challenges that merchants may face when using BNPL solutions. As a service provider, PayU aims to overcome these challenges and provide merchants with a smoother and more satisfying access experience.

Authentication Challenges: Authentication for BNPL integration includes registration and approval of BNPL providers and acquiring and nodal banks. In addition, additional documentation may be required to verify merchant identity, legitimacy of business and correctness of information provided.

Higher Merchant Fees: There are fees involved in BNPL services and the provider offers different packages for merchants. Merchants can choose the package that suits their budget.PayU reduces the cost burden by offering services such as bulk discounts, customised pricing for large businesses and dedicated account managers.

Integration Challenges: Merchants may need to invest in tools and technology to integrate the BNPL system. This requires integrating payment methods into the checkout process.

Multiple Options: There are many BNPL service providers and each provider has multiple BNPL service packages. It can be confusing for a merchant to choose one of them.

reach a verdict

One may note that buy now pay later may offer cost efficiencies to merchants despite the challenges it poses. As buy now pay later gains popularity in India, expect to see the latest payment optimisation and payment security features applied to transactions, enabling merchants to process global payments seamlessly.

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common problems

How are BNPL companies and merchants integrated? BNPL embedded financing solutions are integrated into the merchant platform, whether it is a website or an app. As a payment mechanism within the merchant platform, the BNPL provider offers credit and adds customers.How are BNPL transactions settled? Customers can select preferred BNPL payment options at checkout. For example, PayU pays the merchant the full purchase value of the order, after deducting any applicable merchant fees, and then collects the payment from the customer according to the agreed terms.