Buy Now Pay Later

Buy now, pay later is a type of short-term financing that allows consumers to make purchases and pay for them at a future date. BNPL is generally structured like an installment plan money lending process that involves consumers, financiers, and merchants.

Here is how the BNPL process works for both consumers and retailers.

1. A customer shops as normal and begins the checkout process.
2. The retailer’s chosen BNPL vendor presents the option to buy now and pay later.
3. The lender runs a soft credit check on the customer.
4. The BNPL vendor charges a fee to the retailer.
5. The customer pays off the balance over time.

As a consumer, you enjoy several potential benefits when using a BNPL service.

• It’s an equalizer for those without credit cards. A significant minority of customers (about 20%) do not have a credit card, and the majority (55%) of those with a credit card has maxed out at least one card. A BNPL service offers many of the same benefits as a credit card but for smaller, individual purchases. You can even use a BNPL service like a credit card by requesting a virtual card number in advance of your purchase. This card number will cover the exact amount of money needed to complete your purchase. You do all this on the BNPL vendor’s website or via its smartphone app.

• Flexible payment options. Most BNPL services offer options to customers at the point of sale. As a customer, you can pay the full purchase price using the BNPL service, or you can split your purchase between BNPL and some other payment source (like a debit card).

• Options for interest-free payments. If you choose a short loan period and make your payments on time, you can borrow money without paying any interest. 

• Soft credit checks have no impact on your credit. Most BNPL vendors run soft credit checks on their clients to affirm their eligibility for a loan. Unlike a hard credit check, this will not dent your credit score. On the other hand, if you are late in your payments to your BNPL vendor, this does get reported to credit bureaus, much like when you’re late on credit card payments.

• Expanded Customer Base by making larger purchases more affordable through BNPL
• Improved Customer Experience by giving choices about their preferred payment options and more control over purchasing decisions.
• Greater Customer Loyalty. 76% of U.S. consumers are more likely to make a retail purchase if a payment plan backed by a simple and seamless point-of-sale experience is offered.
• Higher Average Ticket Size. Smaller, incremental payments ease the initial financial burden, empowering additional purchases. 
• Higher Conversion Rates by reducing cart abandonment by making it possible for customers to pay over time instead of all at once.