Buy Now Pay Later: The Future of Consumer Financing

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BNPL or buy-now-pay-later is a well-known commodity inside the point of sale world. POS financing is not a new trend but is expanding rapidly across e-commerce payment options. It is prevalent among young consumers such as Gen Z and Millennials.

Consumers are looking for flexible consumer financing, especially interest-free because of the financial hardships by covid-19. In the current age, financing goes beyond promotional and installment loans, including promotional rates and credit card providers. Financial technology platforms like buy now pay later are very attractive at the POS of a product page. We can see the shift in customers from physical cash shopping to online shopping in the current age.

Reasons why BNPL should remain as a critical element in your consumer-lending portfolio

1. BNPL increases brand awareness

The principal reason for offering BNPL is the possibility to acquire new customers and the best customers. From the eyes of a generation, millennials and gen z are disrupting the payment industry, and most of them do not want to spend on credit card interest. Most Gen Z and Millennials decide to embrace BNPL because of the economic blow on a global scale. The young consumer is used to digital consumer financing experiences and will take your business to better heights.

The level of accessibility to these consumers and an opportunity to build LTV will rely on the degree of integration from the lender’s side into the customer’s experience with your outlet.

2. Increase engagement from existing customers

The flexibility in payment options allows pre-existing customers to originate new debit and credit using BNPL. This circumstance will enable them to increase the number of purchases they make at a time. This process will undoubtedly increase POS engagement with current customers. The benefits of this feature will depend upon your expertise and effectiveness of implementation between products.

3. Meet the customer at the POS

A strategic aid of BNPL is that you will make a customer’s needs available when they want and where they want. According to numerous studies regarding the future of payments, the process of buying something and being paid will catch up in the middle. The lenders give the customers an easy option of acquiring a product they want, whenever they want it, using consumer financing.

Why is BNPL a rising trend among consumers?

Research from CFG indicates that over seventy percent of consumers are more likely to make retail purchases if they offer easy and simple payment methods at the POS. Over the past couple of years, these offerings are becoming more mainstream inside e-commerce, and the option to buy now and pay later is no longer a commodity but an expectation.

When considering BNPL from the consumer’s perception, it becomes obvious why these options continue to complete credit and debit payments. Consumers do not open lines of consumer financing to acquire credit, but they do it to buy things. If consumers think about choosing between receiving a new card to pay for an expensive item and getting the item right away with a payment connection, they will most likely choose the latter. Point of sale is the application of an old idea, and you will see the more traditional lenders coming up with more competitive offerings. BNPL allows customers to acquire something instantly, and this is why more retailers are allowing this strategy.

The pandemic and BNPL

The global pandemic is an undeniable acceleration to the growth of the BNPL market for various reasons. As the global market of BNPL is in an uprising, the industry will process over six hundred billion dollars by 2025. This addition is over a ninety percent increment from the numbers in 2019. The numbers will also reach an overall value of twelve percent of total e-commerce spending on physical goods by 2025. BNPL using mobile devices will also grow at a steady sixteen percent compound annual growth rate.

Many countries across the USA and EU will notice the rise of BNPL, which may arise in some Asian countries. The underbanked population in India, Singapore, Malaysia, and Vietnam are eyeing BNPL, increasing people by a billion potential users. The Southeast Asian revenue is also expecting growth of a hundred million dollars by the year 2025. The complex annual growth rate of this market will be around ten percent by the year 2025.

Challenges of BNPL

BNPL might seem like a straightforward consumer financing option to adopt, but fraud risks and identity thefts are still visible. The global unemployment crisis is also consistently increasing, and fraud operators are taking advantage of this underpaid consumer by riding this train. The underpaid population falls victim to this crime by acting as mules to purchase products for the fraud company. The mule will get payments for a few products, and then the fraud organization will stop posting gains. The BNPL Company and the mule might have issues, but the fraud organization will make money by reselling those products.

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