The Pros & Cons of Buy-Now-Pay-Later for Business


If you’re like many successful online businesses, you offer a range of flexible payment options, including credit/debit cards, PayPal, and e-wallets — but should you also be offering a buy-now-pay-later (BNPL) option? The payment solutions experts at Unicorn Payment say yes. It’s easy to set up, and the pros far outweigh the cons. Consider the facts about this emerging payment option.

How Buy-Now-Pay-Later Works

The idea behind a typical buy-now-pay-later program is that the customer can pay for their goods in four interest-free installments or the total cost after 30 days. This gives them a chance to spread out the cost of an item or return it if they’re not 100% satisfied.

Rather than footing the debt yourself, the BNPL provider — such as Afterpay or Karna — pays you up front for the goods or services that the customer purchased. The customer then deals with the third-party BNPL company to finalize the financial details of the loan.

Buy-Now-Pay-Later Benefits for Customers

For customers, the benefits of buy-now-pay-later are obvious: They can have the shoes, bike, or speakers they want now without the pain of a hefty drop in their bank balance. In some cases, the customer can even take multiple items home to try and only pay for the ones they like — returning the other items within 30 days.

The other crucial benefit for customers — and particularly millennials — is that they can avoid the pitfalls of credit cards with high interest rates while still enjoying goods and services sooner. BNPL loans are generally approved on the spot, and the customer doesn’t have to worry about a negative credit score as long as they meet their payments.

Buy-Now-Pay-Later for Business

For businesses, buy-now-pay-later can easily be integrated into your current payment platform with a small commission and/or flat fee. There are several advantages to offering BNPL as one of your regular payment options:

You’re Covered if the Customer Defaults

With “fintech” services like Klarna, you receive the payment in full whether or not the customer defaults. It’s a bit like a bank lending arrangement — you get paid up front, and the BNPL service then deals with the customer.

Customers Tend to Spend More

Once the upfront pain of a purchase is removed, customers are happier to buy more goods. According to research from professor Scott Galloway, BNPL can increase average basket sizes by a large 20-30% — boosting your sales and improving your bottom line.

The Commission Rates Are Very Reasonable

Just as credit and debit card providers charge a fee for having EFTPOS machines in your physical store, online payment services also attract a charge. BNPL services charge businesses a low commission of just 3-6%.

Weighing the Benefits of Buy-Now-Pay-Later Programs

In the competitive online world, offering the greatest ease of purchase to your customers is not only a nice touch — it has come to be expected. Retail giants like Amazon have won shoppers’ hearts with free shipping, two-day deliveries, free returns, and streamlined orders, and now online customers won’t settle for anything less.

While you might lose 2-6% of a sale in commissions and transaction fees, a 20-30% larger average basket size more than pays for the cost of offering a buy-now-pay-later option at checkout. When you partner with a BNPL provider, you will also be featured on the provider’s list — increasing your visibility among customers who have used this payment option before.

Pleasing the Customer Has to Come First

For customers, buy-now-pay-later offers flexibility without a long and difficult approval process. It gives them many of the benefits of a credit card without the high interest rates.

Your main concern as a merchant is to provide the best possible customer experience while maximizing your bottom line. It’s all part of replicating the in-person customer service experience and incentivizing your customers to come back again.