Accepting digital wallets: What they are & how they work
Buy Now, Pay Later is everywhere these days, putting big ticket items and spontaneous splurges within easy reach. These digital financial tools that let shoppers make purchases and pay them off over time have long been popular globally and are now seeing a significant uptick in North America.
In fact, BNPL grew over 200% in the U.S. last year, driven by adoption from two generations more likely to use debit to make purchases: Millennials and Gen Z. For businesses looking to remove friction from their checkout and delight their customers, BNPL is increasingly vital.
Here’s why the right BNPL helps you remove barriers for your debit-loving shoppers and boost your average transaction value (ATV).
Top 3 items purchased with BNPL
For merchants large and small, debit is often a preferred way to get paid, since it’s one of the most economical payment methods to offer. However, having funds available caps a debit-dependent shopper’s buying power, resulting in a lower ATV for your business. BNPL is a way to help remove that barrier to larger purchases for your debit-dependent customers.
Today, over a third of U.S. consumers (37%) have used a BNPL service, with those aged 35-44 most likely to have tried one (and those 54+ least likely). In the next five years, analysts predict global BNPL and ePOS finance spending via ecommerce channels to rise 92% — an increase from $353 billion to $680 billion. And by 2025, BNPL’s value is expected to reach 12% of total ecommerce spend on physical goods alone.
BNPL is an umbrella term for a variety of payment methods that let shoppers buy without paying the full amount upfront. Like layaway and installment plans of old, BNPL tenders offer shoppers convenience, flexibility, and transparency.
BNPL services come in two types:
Shoppers checkout with no money paid and owe the full amount in 14-30 days. This is a zero interest option and most popular in Europe.
Shoppers pay the balance in bi-weekly or monthly payments. With some BNPL payment methods, a deposit is collected at time of purchase.* This is most popular in North America.
Did you know?
It’s a common misconception that BNPL and installments are synonymous, but installments are actually a type of BNPL.
BNPL services have been gaining traction with retailers in North America for a while. Today, they’re being used by consumer brands, luxury retailers, and superstores to help boost conversion and encourage spending through seamless checkout flows and trusted payment methods.
While BNPL started with durable goods (e.g., mattresses), it’s now gaining traction in luxury, mid-tier, and mass market segments. BNPL isn’t suitable for all merchants, though. Some B2B and subscription/recurring-based businesses won’t benefit from these types of payment methods.
The flexibility BNPL offers customers is very appealing, especially when unexpected expenses arise, like when that ancient, hand-me-down mattress finally gives out, or a shopper’s holiday budget doesn’t cover everyone on their list. BNPL lets consumers bridge the gap to their next paycheck with little risk.
Offering your customers’ payment method of choice has its benefits. These services can help businesses increase basket sizes, introduce new customers to their brand, improve conversion rates, and build customer loyalty. Because BNPL is as much a marketing tool as it is a payment method, BNPL requires early awareness of BNPL throughout the buyer’s journey. Exposing your BNPL payment options early and often will help to maximize these key performance indicators.
Current economic stressors have accelerated consumers’ use of BNPL, but COVID-19 isn’t the only thing driving adoption. BNPL is also becoming increasingly well-known among North American shoppers. In short, BNPL is having a moment and now’s the time to get on board.
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