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Today's digital shoppers love to shop online instead of visiting a brick-and-mortar store. Daily marketing tactics make brands think of something new and strategic to beat the competition. Buy Now Pay Later is one of the marketing strategies and a convenient payment option that drives customers to buy the products. Let’s understand in detail about Buy Now, Pay Later.

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**What does Buy Now Pay Later, or BNPL, mean?**

"Buy now, pay later" means you can buy something and get it right away, but you pay for it later, usually in several installments.

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Recent growth in buy now, pay later (BNPL) doesn't look like it will slow down.

 ![](https://cdn.hackernoon.com/images/PwsYylMbuMNa23VOrvkuEW8J43t2-2i93o3x.png)

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Source: [eMarketer](https://www.insiderintelligence.com/chart/253824/us-buy-now-pay-later-users-2018-2025-millions-of-population)

Even though this kind of payment plan has been around for a long time, it took off during the pandemic when more people started shopping online.

You can now use a "buy now, pay later" plan at most significant stores, but whether you should use the BNPL method for purchasing a product as a consumer depends on your financial capacity. On the other hand, whether you should offer this method of purchase as a business owner should be determined by your business model and objective.

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Your purchase from BNPL is split into equal payments, the first of which is due at checkout. Your debit or credit card is charged for the rest of the costs until your purchase is paid for in full.

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 ![](https://cdn.hackernoon.com/images/PwsYylMbuMNa23VOrvkuEW8J43t2-0oa3ocr.png)

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[Source](https://www.insiderintelligence.com/content/era-of-uncertainty-buy-now-pay-later)

When you shop online, you'll often see BNPL payment plans.

There are also BNPL sites for travel and health care.

## How Do Buying Now and Paying Later Work?

For an example of BNPL operation, let's look at Meg, a shopper who wants the best air purifier for her house and pay for it later. She looks for one online and finds the one she wants at one  site for $200. It costs more than other models that fit her budget of $125, but it has all the features she wants. The following steps show how she got to the point where she could buy the item in installments.

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1. Meg finds out that she can pay over time. On the product page for the air purifier, she sees a $200 price tag and a message that says she could pay $50 each month for four months and own the item. This 4-way split is attractive to her because she can't afford to pay $200 immediately. But it's easier to handle if you spend $50 every two weeks. The pricing information also links to a BNPL service, so she can apply to see if she is eligible.

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2. She applies by clicking the link. Then, she gives four short pieces of information (name, birthdate, phone number, and email address). Affirm, an app used for BNPL uses an underwriting technology that looks at the data and lets her know within seconds if she has been approved or not.

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3. Meg buys an air cleaner. At checkout, she chooses to Affirm as her payment method. She can see exactly how her payments will work and agrees to them. This finishes the deal. (In this case, she doesn't have to pay any interest. Other BNPL purchases may have longer terms and fixed monthly payments with interest. For these kinds of deals, you might also need to get more information.)

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4. The store gets paid right away. Generic Air doesn't have to collect Meg's payments because of the tie-up with Affirm. Meg gets the air cleaner she's been wanting.

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Meg gives money to Affirm. In this case, she pays her bills every two weeks, which is what she agreed to do.

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## How does BNPL Help Business Owners?

Lots of sales Customers are more likely to buy more products from stores that offer more ways to pay, like BNPL. Customer usually only buys things when they are comfortable with how to pay for them. When customers can choose how to pay, they are more likely to buy more than one product, even if it is a bit more expensive. For example, you are a Magento store owner, and you want to provide better payment options to your customer. You can consider adding the buy now, pay later option to your store. You can purchase the extension from the marketplace, or you can take help from [expert Magento developers](https://rocktechnolabs.com/hire-magento-developers/) who can develop this custom solution for you.

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**Fewer people are giving up on their carts**

A [Mastercard study](https://www.mastercard.com/news/press/2021/september/mastercard-reinvents-installments-to-give-consumers-more-payment-choices-wherever-they-shop/) found that using BNPL at checkout can cut the number of carts that are left empty by 35%. Most shoppers go to their carriages to look around, but that's not always the case. These problems can be solved well by BNPL. For example, suppose shoppers abandon their carts because they couldn't find a good way to pay or because the products were too expensive. In that case, BNPL will be able to reject every reason because customers can deliver when it's convenient for them. The price of expensive products can be split up into more affordable payments.

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**Increase the customer's value over time**

When a customer buys from an online platform that accepts BNPL payments repeatedly, the merchant has met the customer's needs. Also, returning to a platform to buy something shows that the merchant has earned the customers' trust and loyalty by giving them flexible payment terms. Customer Lifetime Value can be easily raised when customers return to the same shopping platform to buy things.

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**Raise the average value of each order**

When customers order products one at a time, the total amount is higher, which is good for a business. Customers can shop more by choosing BNPL at checkout because they can make the payment later and also in installments despite having low cash at the time of purchase.  Paying overtime and not having to pay anything upfront makes it easier to buy more. Paying overtime and not having to pay anything upfront makes it easier to buy more. When customers know how BNPL can help them and shop more, the average order value increases, and merchants get more from each customer.

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**Why Millennials and Gen Zs are jumping on the buy now pay later trend?**

In 2018 when apps like Affirm, Klarna, and Afterpay were still establishing themselves as the key players in the BNPL, [it was reported](https://www.insiderintelligence.com/insights/buy-now-pay-later-gen-z-millennials/) the primary users of the payment method were Gen X and the millennials. These two groups will continue to be the driving force in the BNPL method, where last year, 40 percent of the users were millennials, and in the next four years, Gen Z will eat into the share.

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Millennials and Gen Z are jumping into this trend because they find it a financially flexible payment solution with a limited cash flow. It is often used for larger ticket items like clothing, fashion items, jewelry, digital leisure goods, and appliances. All of these are the most frequently purchased items by the younger cohort.

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Apart from the financial convenience it offers, certain other benefits that make the younger generation buy into the trend are:

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**Alternative To Credit Cards:** Items can be bought even if they don’t have credit cards; it is a perfect alternative to credit cards.

**E-Wallet Integration:** The easy integration of the BNPL apps into the stores makes purchasing easy for these two generations. Often the service is integrated into the buyer’s e-wallet, giving the consumer a wider choice for purchases.

**Easy Refund:** The refunds are accessible with the method, where the money is transferred back to the wallet immediately when a payment is made when the customer cancels the purchase. Whereas in case of payment is made through net banking or debit/credit cards, the refund can happen after a couple of days.

**Easy EMI:** The easy EMI feature offered by BNPL makes the method a hit among the millennials and Gen Z. They can repay the amount in small EMIs without interest, allowing them to buy items that would otherwise be out of their reach.

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Moreover, Buy Now Pay Later (BNPL) is a significant change in alternative financing and payments for online shopping. The pandemic sped up this trend; it became trendy very quickly. BNPL has become a digital lifestyle solution as more merchants start to use it. The most recent report showed that e-commerce in Western Europe will grow at a CAGR of 10%, bringing the size of the market to EUR 715 billion by 2026.

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**Why shouldn't you buy now and pay later?**

Buy now, pay later. Financing can give you more money to spend and help your credit score simultaneously. But each loan offer is different. The three main things that should make you not want to join the BNPL are:

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**You might be tempted to spend more than you can afford**

With BNPL, you only have to pay for a portion of your purchase up front. The rest can be paid off over several months. Buy now, pay later E-commerce you can't pay for immediately makes it much more manageable. But that could lead you to spend more than you can afford.

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Say you want to buy something that costs $500, but you only have $50. If you can pay for it over time, you might be more likely to buy it. But in reality, if you only have $50 left over in your budget, it may be a sign that you shouldn't buy a $500 item unless you need it in an emergency (like if you're a freelance writer and that $500 item is a laptop you need to do your job).

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**If you don't pay on time, you might have to pay fees and penalties**

BNPL plans are better than credit cards because they don't start charging interest right away. But if you don't make your payments on time, you might have to pay penalties and fees that make your purchases much more expensive.

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**It could hurt your credit score**

You don't have a good credit score to get a BNPL plan. These services don't check your credit report as thoroughly as other loans. But if you got into your BNPL payments, your credit score could take a big hit, just like it would if you didn't make the minimum payment on your credit card when it was due.

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**The Impact Of Buy Now Pay Later**

Buy Now, Pay Later sounds attractive to customers. It can also be risky for the brands to go for this. It’s advisable no matter which marketing strategy you opt to attract customers. So, make sure to plan out smartly to offer buy now and pay later to customers. In the short run, this tactic can show you a good number of product sales. For more interesting information about the latest eCommerce trends, visit our blog and stay up to date.

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