Buy Now Pay Later: 5 Reasons you should offer financing at checkout
Buy Now Pay Later = Consumers purchasing power
In light of the ongoing pandemic, retailers are working hard and taking proactive measures to ensure business progression during this time. An easy action all merchants can adopt to fuel business stability and continuity now and during the post-pandemic world is to offer consumers Buy Now Pay Later solutions.
The amount of consumers ordering online has been on the rise and that number continues to grow as many retailers are forced to temporarily close their brick and mortar locations. Providing consumers Buy Now Pay Later options make shopping more accessible due to the accommodating payment terms being offered. In turn, offering consumers Buy Now Pay Later encourages larger average order values, directly increasing revenue for the business. This payment method is becoming increasingly popular with big-named brands which means it’s also becoming an expected part of the shopping journey for many consumers. Offering Buy Now Pay Later options will provide your business with the boost it needs, here are 5 reasons why you should offer your consumers this alternative payment method.
1. Millennials are driving Buy Now Pay Later
Short-term installment loans have been on the rise throughout the past 3-5 years and it’s in large part due to Millennials (individuals ages 23 – 38). The financial crisis of 2008 instilled a lack of trust in traditional financial institutions and their parents Gen X (individuals ages 40-54) and in some cases, Baby Boomers (individuals ages 66 – 75) have often warned them of the dangers of credit card debt and high-interest rates. Younger generations including Generation Z, those who are 18 years or older, are moving towards digital banking and as a result, they’re walking into their banks’ traditional brick-and-mortar branches less often than ever before.
The concept isn’t foreign, financing has always existed for big-ticket items like appliances, furniture, jewelry, and more. Buy Now Pay Later options can be thought of as a modern version of layaway. What is new, is the instant point of sale financing available online at checkout. It’s a line of credit that is not associated with a consumer’s credit card. Shoppers may have the option to finance their purchase between a period of 6 – 48 months all while enjoying 0% APR vs. traditional credit cards that can carry 17% APR on average. As more retailers are driven to take their businesses online, Buy Now Pay Later is the easiest way to bring financing choices to shoppers.
2. Consumers prefer Buy Now Pay Later over Credit Cards
Credit cards are still commonly used however consumers are no longer relying on them as a primary payment method instead, shoppers are favoring their debit cards. As a business owner, it’s naive to think most shoppers have access and/or use credit cards as a payment method. In reality, many of your shoppers may not have one. Business Insider reports 68% of Millennials do not own a single credit card! This generation accounts for the greatest share of the U.S population at 26% and the employed population at 34%, so it’s easy to understand why their behaviors and preferences will have a profound impact on commerce.
Although Millennials are primary targets of Buy Now Pay Later, older generations are just as attracted to the idea of short-term installment loans. In a survey conducted by American Banker, 87% of respondents expressed more interest in paying for purchases via monthly installments vs typical credit cards. Consumers are increasingly demanding control of their purchasing experience. Buy Now Pay Later is great for those who do not have access to a line of credit or who don’t want to rely on it exclusively. Buy Now Pay Later is a smart option to offer today’s cautious and responsible shoppers.
3. Buy Now Pay Later Increases Sales
The checkout process can be strenuous for consumers, any friction with the payment process or lack of payment options at the checkout will likely result in lost sales. Cart abandonment rates are one of the biggest problems online merchants face. Studies have found that 81% of shoppers abandon their carts online before they complete their purchase. A valuable way to combat cart abandonment rates and become more appealing to your consumers is by offering Buy Now Pay Later solutions that offer instant and flexible credit options from multiple lenders to ensure flawless user experience.
Imagine having a conversation with your shoppers at the point of sale and asking them what monthly price they feel comfortable paying and how long they would like the monthly payments to last. Think about the surprise and satisfaction that would bring your buyers. Point of Sale Financing or Buy Now Pay Later is essentially just that, it’s offering your shoppers choice and flexibility in payment options.
Forrester reported that merchants who offer point of sale financing from a single lender have seen a 32% increase in sales, however, merchants who offer Buy Now Pay Later options from ChargeAfter, a multi-lender platform, have enjoyed a 45% increase in sales! Offering Buy Now Pay Later will help you maintain business stability and fuel business growth due to the accommodating payment terms offered to your consumers.
4. Buy Now Pay Later is User-Friendly
Technological advancements are enabling consumers to be in the “driver’s seat” for their shopping experience. A transparent user-friendly experience is necessary when it comes to integrating new processes into your business. ChargeAfter’s Buy Now Pay Later platform is clear and easy to maneuver. When your consumers are ready to checkout they simply select the financing option which is offered alongside traditional payment methods. The consumer would then fill out a short financing application, after approval personalized financing options would appear. Once the shopper selects the financing terms that best fit their needs, it would be applied directly to their checkout. This whole process takes less than a minute!
5. Buy Now Pay Later makes shopping more accessible
Consumers are loyal to businesses that help them manage their relationship with credit and avoid its pitfalls. Consumers don’t mind the “buy now, pay later” model, they appreciate it. Not only will you gain a competitive advantage among other retailers but you will enable a stronger relationship with your consumers due to the accommodation being offered. In a study conducted by PYMNTS, it was reported that 74% of US cardholders think installment plans are helpful for budgeting while 70% of consumers think installments help alleviate the stress of making large purchases upfront. In a survey conducted by Citizens Financial Group it was found that 62% of consumers would prefer fixed monthly plans with clear payment terms. The statistics demonstrate that consumers want a simple and easy experience when they make purchases. Research shows that retail brands should modernize their payment model by moving away from co-brand/store credit approaches and instead offer instant financing options at the point of sale.
Before signing up to offer a point of sale financing from both a single lender or a multi-lender provider, knowing the platforms’ average approval rates should be on the top of your due diligence. Single lenders only focus on approving the top 35% of consumers with pristine credit which means they’re declining 70% of consumers who apply for financing at checkout. This leads to increased site abandonments, cart abandonments, and your rejected potential consumers ending up completing their purchase by your competitor. ChargeAfter is the first global lender to provide a complete solution for Point of Sale financing from multiple lenders. Merchants have the ability to offer personalized and instant Buy Now Pay Later options to shoppers across all credit tiers (prime, near-prime, and subprime) from multiple lenders. Meaning, merchants can offer 85% approval rates to their consumers who apply for financing while checking out! Imagine the impact that could have on your conversion rates!
Will you jump on the next wave of credit?
Furniture Today announced traffic conversion and average order values are down for many retailers even though online browsing has increased at an exponential rate. Yes, some industries are prospering, specifically grocery stores, athletic gear, and furniture however, there are many industries like automotive, apparel, cosmetics, hospitality, and more that are down. Having a plan to deal with the on-going pandemic and its after-effects will be key for your business to thrive.
Focus on your business continuity now and plan for a post-pandemic world by offering consumers Point of Sale Financing. It’s a simple solution that will help your business prosper while providing your shoppers the flexibility to help them buy items they need whether they are mid or high ticket purchases.