When considering the payment methods offered for customers on E-Commerce websites, making the process as hassle-free and flexible as possible will directly impact the experience for customers.
In turn when implemented correctly with the right payment gateways, it can increase conversion rates, reduce cart abandonment and improve the average purchase value, whilst attracting a wider audience.
One payment method which is proving to be an essential to integrate for any E-Commerce business is the option to offer Buy Now, Pay Later services. Examples of this payment gateway includes Klarna, Clearpay and PayPal.
Our blog post will look at the benefits both to the customer and for your business. As part of this we will cover the most popular options that are integrated for E-Commerce websites
What is Buy Now Pay Later?
This payment gateway for merchants provides customers the ability to buy an item now from an E-Commerce business, however, they do not have to pay for it immediately.
The options vary between payment gateways, but typically can be anything from 3-4 payments across a 6 week period, pay in 30 days or even have finance for up to 36 months.
Buy Now Pay Later (BNPL) services have increased in popularity year on year, particularly since Covid-19 and the cost of living crisis, proving to be particularly popular with the younger generation such as millennials and generation Z.
When a purchase is made on an E-Commerce website which has integrated with a payment gateway for a BNPL provider, the merchant is paid directly by the Buy Now Pay Later provider who take on the responsibility themselves to collect the funds from the customer.
Benefits for E-Commerce business
Whilst there are benefits for customers when they choose to pay with Buy Now Pay Later providers, there in turn are many benefits to businesses too. This includes firstly widening the audience size your E-Commerce website can reach.
BNPL providers are increasing in popularity, a study actually found that 9.5 million brits would avoid buying from retailers that don’t offer BNPL lenders at the checkout. Therefore not integrating a BNPL provider as part of the payment options could result in losing out on potential sales.
Due to Buy Now Pay Later being a newer payment method, now is the ideal time to get ahead of your competitors and meet the demands of the changing customer base. As the statistic shows above, a business could end up with an increased sales volume, particularly if one of the first in the industry to offer a BNPL provider.
Once a purchase is made the BNPL providers take on responsibility of collecting the money from the customer. The merchant is paid directly by the Buy Now Pay Later providers such as Klarna or PayPal.
Therefore meaning once any processing fees are deducted the funds go directly to the bank account for the E-Commerce business, without the worry of retrieving the money from the customer.
The use of credit cards is in decline with customers wanting a more flexible, simple and convenient method of payment, which BNPL providers offer them with often only soft credit card checks and little interest rates or interest free.
With the Buy Now Pay Later providers taking on the responsibility and risk of customers missing payments or late payments. For businesses, it is an ideal solution to give customers a positive experience and meet demand for other payment methods, with low risk for the business.
Increases customer experience
Offering as part of the payment methods a BNPL provider can improve the customer experience. The appeal of a credit card company which may be thought of first when thinking of payment methods has been gradually declining, particularly due to in some cases interest charges increasing and the spending limit for many reducing.
It has led to shoppers seeking out alternative borrowing. For customers a Buy Now Pay Later is a good idea, with typically only soft credit checks meaning the need for a good credit score on a credit file is reduced.
Depending on the BNPL lender, they may provide it as interest free to customers and some have options to pay over a longer period. For example, if the purchase price was a high ticket item, this may be preferred.
A study found merchants had an 85% higher average order value for purchases using BNPL over other payment methods. The flexibility and convenience BNPL services provide can improve the customer experience, which in turn can increase sales and loyalty with an E-Commerce business as the study above showed.
Which BNPL provider to integrate?
There are many BNPL providers available in the market, however it is important to choose the right one for your business and your target audience. Some factors to consider is the geographical area covered depending on where your business operates.
Each Buy Now Pay Later provider will vary with how much credit they will offer. Therefore the different spending limit options should be considered alongside the average purchase price. This can be reviewed with the repayment terms, such as length of time offered for customers when shopping online.
For example online retailers with lower priced items may only need short term financing over a short period, whereas higher priced items could require a repayment plan option which is offered over a longer period of time such as 36 monthly installments for the outstanding balance which Klarna offer as an option.
PayPal are an already well established payment gateway which is offered by many businesses for online shopping. When customers pay they can also make use of PayPal Credit if integrated into the E-Commerce website payment options.
Their offering for customers is four interest free installments for purchases of £99 or more in one go with PayPal Credit. For the customer once they are approved, it is included on their PayPal account. Making it quick and easy to use from any device without the need for a credit or debit card to hand.
PayPal also offer Pay in 4, which is paid every two weeks or Pay Monthly with plans up to 24 months. They offer this with no sign up or late fees and also provide Purchase Protection on eligible purchases. Giving customers a range of flexibility to suit their needs.
With more than 2 million transactions daily and of their 147 million global customers, 25 million are in the UK. It is easy to see why Klarna is likely to be the BNPL option most customers will be familiar with.
One of the benefits to Klarna is the different repayment plan options they offer. Most providers for BNPL generally offer 3-4 monthly payments. However with Klarna it provides the option to pay now, pay in 3 or pay in 30 days which are do not charge interest to the customer or needs in-depth credit history or credit reports.
Klarna also offers financing for customers to borrow money over a longer term. This is useful where a customer’s credit score may not give them this option with their own credit card or if needed to make a high value purchase.
With 19 million global customers Clearpay is another BNPL provider for E-Commerce businesses to consider as a possible payment gateway. They offer 4 interest free payments over a 6 week period. Like most providers fees are only occurred for late fees and missed payments.
Clearpay state that their top 10% of UK customers use Clearpay more than 32 times per year. They also send 1 million daily global referrals to merchants from their shop directory on their app. Therefore worth considering as a method of lead generation.
How Can We Help?
We hope our blog post helped to show the importance for E-Commerce websites to integrate BNPL providers in order to widen their audience, increase conversions and average purchase value.
A study actually found that 45% of BNPL users said it allowed them to make purchases that otherwise wouldn’t have been feasible. These are sales which are being missed without including a Buy Now Pay Later option for customers.
We are experts at integrating BNPL providers for E-Commerce businesses and can happily provide our recommendation on the best ones to suit your business. Please feel free to get in touch to discuss how we can help.
Creative director at 1PCS. Addicted to design, SEO, pizza and helping companies big and small succeed online.