Is Buy Now Pay Later Suitable For Your Business?

Discover the pros and cons of integrating Buy Now, Pay Later (BNPL) services into your business model. Evaluate the potential risks and challenges associated with BNPL, and make an informed decision on whether it is the right fit for your business.

Is Buy Now Pay Later Suitable For Your Business?
Photo by freestocks / Unsplash

In recent years, the 'Buy Now, Pay Later' (BNPL) model has gained significant popularity, revolutionizing the way consumers make purchases. This payment option allows customers to acquire goods and services immediately while deferring payment over time.

The BNPL market in Malaysia is expected to grow by 23.6% year-on-year to reach US$2.298.6 billion in 2023. In the region, BNPL providers include Atome, FavePay Later, GrabPayLater and SPaylater. These BNPL platforms are powered using artificial intelligence (AI) and credit reports to build a risk profile for its users.

While it may seem like a win-win situation for both businesses and customers, it's crucial to analyze the pros and cons of offering BNPL from a business perspective.

5 reasons you should offer 'buy now, pay later' for online shopping

1. Increased conversion rates

By incorporating BNPL options into their checkout process, businesses can attract more customers and boost conversion rates. Many customers are enticed by the flexibility of deferred payments, enabling them to make purchases they might otherwise postpone or forgo.

2. Expanded customer base

The availability of BNPL can attract new customers who prefer the convenience of spreading out their payments. It appeals particularly to younger demographics, who are more inclined to seek alternative payment options.

BNPL is also used by consumers that, for one reason or another, do not have a credit card. It is also attractive to those who view credit cards as predatory – with BNPL seen as an option that offers clarity into repayments and late fees.

3. Higher average order value

BNPL options often encourage customers to spend more than they originally planned. The ability to split payments over time can prompt individuals to purchase higher-priced items or add additional products to their cart, thereby increasing the average order value for businesses.

It is estimated that order sizes go up 50% when a BNPL service is offered. The likelihood for a closed sale also goes up by up to 30%, meaning huge revenue opportunities for retailers.

4. Reduced cart abandonment

Cart abandonment is a persistent challenge for e-commerce businesses. Offering BNPL can help alleviate this issue by minimizing financial barriers and providing customers with greater purchasing power. By spreading out payments, customers may feel more comfortable completing their transactions.

5. Competitive advantage

In an increasingly crowded marketplace, businesses that offer BNPL gain a competitive edge. This modern payment method differentiates them from competitors and positions them as customer-centric, enhancing brand loyalty and attracting repeat business.

5 reasons not to offer 'buy now, pay later' for online shopping

1. Ethical considerations

Some critics argue that BNPL can contribute to impulsive spending and a lack of financial responsibility among consumers. This can lead to increased levels of personal debt and financial instability for individuals. Businesses offering BNPL must be mindful of these concerns and promote responsible spending habits.

2. Increased risk of bad debt

When businesses extend credit through BNPL options, there is a risk of customers defaulting on their payments. This can lead to potential losses for businesses, especially if they don't have effective risk assessment and debt collection measures in place.

However, if businesses partner with a BNPL platform, the debt risk is instead taken on by the platform. Late fees, interest etc will be the responsibility of the platform instead of the retailer.

3. Added administrative burden

Implementing and managing BNPL solutions can be complex and time-consuming. Businesses need to dedicate resources to set up payment infrastructure, handle customer inquiries, and address any issues related to payments or refunds. This can be challenging, particularly for smaller businesses with limited staff and expertise.

4. Higher transaction costs

BNPL providers typically charge businesses a fee for offering their services. These transaction costs can eat into profit margins, particularly for businesses operating on slim margins or selling low-cost items. Careful evaluation is necessary to ensure the benefits outweigh the associated expenses.

5. Potential impact on cash flow

Offering BNPL can disrupt a business's cash flow, as payments are received over an extended period. This may impact the company's ability to manage inventory, pay suppliers, or invest in growth initiatives. Businesses must carefully plan and monitor their cash flow to mitigate potential negative effects.

Ultimately, you decide if and how you could offer BNPL to your customers taking into consideration the reasons above.

Make ‘buy now, pay later’ hassle-free with Tekkis

If you decide to offer BNPL services, Tekkis can help with that. Tekkis t-Pay offers BNPL with Atome, Asia’s leading BNPL platform. Atome gives your customers the option to split their bill into three equal payments. Customers make the first payment at the point of purchase, while the next two payments will be spread 30 days apart. There is no interest or hidden charges.

What’s more, Tekkis t-Pay is:

  • Easy to set up with no coding or programming knowledge required.
  • Free to use with no subscription or hidden fees. You only pay when you make a sale.
  • Practical and usable, supporting a range of payment methods including credit card, bank transfer via FPX, as well as e-wallets.
  • Secure and reliable with 24/7 customer support.

Offer BNPL with Tekkis today by getting in touch with us. Our friendly Customer Experience team is always ready to assist.

If you liked this article or want to discuss something we wrote about, do comment down below. Also, if you haven’t already, subscribe to our newsletter to stay updated about all things online payments and more!

Get in touch with us