If you’re wondering what buy now pay later (BNPL) is, then you’ve come to the right place. The process of this short-term financing allows consumers to purchase a product or service today and pay for it in the future. This process is called frictionless because it involves a middle-man lender and allows the consumer to make the payment for the item at a later date. Here are some of the details about this process.
BNPL is a type of short-term financing that allows consumers to make purchases and pay for them at a future date
BNPL is a popular type of short-term financing that allows consumers a certain amount upfront to pay for a purchase later. The concept is like layaway plans, where the consumer receives a product in exchange for payment in installments at a future date. Companies offering BNPL solutions include Klarna, PayPal, and Affirm. BNPL solutions typically have no hidden fees or credit card processing fees.
It’s a modern-day layaway option
When Big Mama was alive, layaway was a popular way to buy gifts for her grandchildren. She would pay a deposit on an item, keep it until she had enough money to cover the entire purchase, and then take it home. Later, when she had the money, she could use the layaway to make a single, large payment. Walmart was not the first store to discontinue the layaway option, which it did in 2006. However, the company did reinstate it in 2008, following the Great Recession.
It’s a middle-man lender
A Buy Now Pay Later provider is a lender that allows consumers to divide the cost of a purchase into several equal installments, with the first payment due at the time of purchase. In today’s high-inflation economy, this service can be beneficial for many consumers. Companies offering this service ensure that the process is simple, and feature easy-to-use platforms. In addition, consumers can enjoy the convenience of not having to fill out a lengthy credit application.
It’s a frictionless payment method
Frictionless payments are the way to go if you want your customers to enjoy a more seamless shopping experience. They’re faster than a credit card and can also reduce the need for human interaction at checkout. A frictionless payment method allows customers to check out on their own, and it also means that you’ll spend less time serving them and more time helping your staff serve customers. The best part? It won’t even require you to hold your phone over a sensor.
It’s a risk for merchants
There are many benefits to buy now pay later transactions, but they come with a risk. In many cases, merchants cannot collect their payment until the item has been shipped. A recent survey conducted by the financial services firm Credit Karma found that more than a third of respondents were late on their payments. Late fees range from $8 to 25% of an individual order’s total price. Additionally, if a customer is late on a payment, they are banned from the platform until they pay up.