What buy now pay later means for your cash flow

Retailers are facing unpredictable shifts in the way consumers are spending their money, but if there’s one trend that’s showing no signs of slowing down, it’s buy now pay later (BNPL). In fact, when it comes to online shopping, BNPL services are beginning to overtake credit and debit cards as the most popular form of payment, second only to PayPal.

BNPL users are drawn to the payment method for the flexibility it provides, and the relative ease of use compared to credit cards or other more traditional forms of personal loan. Signing up to a BNPL service cuts out the lengthy forms and credit checks that are common in traditional personal loan applications, and helps with their personal cash flow.

But despite the clear interest from consumers, many retailers are still wary of BNPL products. Some express concern over their own cash flow, assuming that they will face risk, slow payment times and merchant fees.

There’s no denying that BNPL services are more expensive than a run-of-the-mill debit card transaction. However, when you factor in how many more sales you can achieve as a result of having that option available and the increase in the overall transaction value, the new sales far outweigh the costs and we know that BNPL makes up a significant share of sales for today’s retailers.

It’s a common misconception that there are additional risks involved with offering credit through BNPL services. Most concerns are unfounded, because the majority of BNPL services take the risk on themselves. Retailers receive full payment by the very next day, and the service providers themselves are the only ones at risk, should the customer not settle their subsequent payments.

This means that a retailer’s cash flow isn’t affected, and the sale is paid for like any other. The only difference is the consumer may pay a percentage of the cost upfront, while the BNPL service pays the rest. BNPL is intended to ease cash flow problems for not only the retailer, but the consumer too. Their offers help consumers feel in control of their spending, because they have the option to pay for items over an extended period of time, without interest. This flexibility works in the retailer’s favour, because they are able to make sales that might otherwise have been abandoned.

While BNPL is clearly massive online, some retailers assume that setting up a BNPL service in-store will be more hassle than it’s worth. In reality, most modern BNPL services have designed their systems with the customer experience top of mind. In-store, customers simply open up their chosen provider’s app and have the checkout assistant scan an automatically generated barcode. Online, it’s even easier: only a few clicks stand between the consumer and their much-wanted product.

Integration with BNPL is actually as simple as flicking on a switch. For example, humm has integration with all the major e-commerce platforms and in-store point of sale systems―as do most BNPL providers.

When the time comes to set up BNPL in your own store, ensure you’re choosing a provider that works for you. Investigate the refund and customer care policies of each in detail, and make sure you fully understand the fees and costs involved. Not only is it critical to be fully informed about your own costs, but to fully understand the risks and benefits for the consumer, too. After all, you need to communicate this to your customers and proudly offer the BNPL option with confidence. Responsibility is key, so always make sure your business is choosing BNPL for the right reasons. And make sure the provider you choose is responsible, stable, and has solid systems in place.

Some services have different offers depending on how expensive the item being purchased is. For example, humm has a BNPL option for purchases up to $2,000 and another BNPL option for purchases greater than $2,000―up to $30,000. So have a think about the kinds of products your business offers, and choose a provider that caters to those kinds of sales.

By giving their customers the ability to pay straight away, retailers are able to inject a sense of freedom and flexibility into the purchasing journey. Once that journey is as seamless as possible, retailers are able to tap into bigger sales and more repeat business. And who wouldn’t want that?

By Libby Minogue, chief revenue officer at flexigroup, the owner of humm