As we wind down from the Hari Raya festivities, many people would still be browsing their favourite...
Buy now pay later, or BNPL, is the latest financing method that is taking off with consumers of today. One study estimates that Malaysia’s BNPL gross merchandise value will increase from US$2 billion in 2022 to US$4.3 billion by 2028. It’s no wonder that more sellers are offering this flexible payment option through providers like Atome, PayLater by Grab, Shopee’s SPayLater, and more.
Before we can answer the question of whether you should offer BNPL payments, we must first answer: what is BNPL?
Join us as we take an insightful dive into the world of BNPL, including how it works, how it benefits you as a seller and why your customers would opt for it. Understanding this novel payment method is key to unlocking greater sales and being at the forefront of innovative transaction options in your industry.
This blog post is the start of our BNPL education series where we aim to educate and inform businesses of the benefits and challenges of offering this payment option. Stay tuned for more informative pieces like this by following us on our social media!
Discovering how BNPL works.
BNPL is a short-term financing option which allows your customers to purchase a product on an instalment basis. Depending on the service provider, you can choose from a fixed term of up to 12 months. Typically, BNPL instalments have no interest or charges to the customer, meaning that they pay for the full amount of the product with no extra cost.
BNPL service providers normally incur a small percentage fee of the full price of the product to the merchant. However, you as the merchant would receive the full amount that would be paid by the customer upfront. This means that you no longer have to worry about late or missed repayments as the BNPL provider would handle these aspects for you.
What makes BNPL so attractive to customers?
Bank Negara Malaysia reported that 44% of BNPL users were between 18 and 30 years of age, which is a demographic with a lower average spending ability. This group mainly comprises of students, fresh graduates, newly employed, and younger individuals. As such, it’s no wonder that a solution that allows these consumers to split larger payments into more manageable amounts.
Credit cards are another alternative for short-term financing and is often brought up in relation to BNPL. One of the key differences between the two is that credit cards often have hefty financing charges if one were to carry forward any unpaid amounts. This makes BNPL the more attractive choice for those who can afford the shorter instalment period.
Credit cards also often require a lengthy application and approval process, taking into account the applicant’s credit score, salary information, employment history, and more. BNPL providers have much less stringent requirements, however this might soon change as new laws seek to place more considerable restrictions on the service.
As consumers, senangPay recommends that you manage your personal finances responsibly as to not incur any debts that are outside your financial capabilities.
Why should you care about BNPL as a merchant?
Understanding your customers' spending habits and channels is crucial to meeting their demands. With the growing number of BNPL users and with all kinds of sellers from various industries offering BNPL, there's little reason not to provide this payment option nowadays.
Providing your customers with another payment option is always beneficial, but the true benefit of BNPL can be seen with encouraging higher value purchases. Merchants who offer BNPL tend to see higher conversion rates for their products, as allowing for flexible payment schemes reduces purchasing hesitancy during high-value transactions like for electronics or luxury goods.
It's been seen that around 50% to 60% of BNPL retailers are from industries that banks typically do not offer financing options to, like cosmetics and fashion. If your business operates within these categories, it's worth considering this payment option to increase your sales volume when targeting a younger clientele.
We hope that we managed to provide an introductory insight into the world of BNPL. By considering the use cases, benefits and alternative options, you should now have a deeper understanding of whether this solution is suitable for you.
If you're still not convinced, don't worry! Later on in this series, we plan to explore comparisons between BNPL and credit cards, as well as an in-depth analysis of the pros and cons of BNPL. Stick around to learn more about this transformative solution.
When you're ready to offer this to your customers, consider one of senangPay's packages for a complete payment gateway solution that offers several payment options, including BNPL. With attractive transaction rates from as low as 2.0% for BNPL payment methods, your sales numbers will surely soar to new heights!
Know something about BNPL that we don't? Let us know down below.