This payment method allows customers to enjoy their coveted item or essential service now, while splitting the purchase into a set number of equal payments. It’s important to know that the BNPL provider will pay the merchant or service provider the entire amount (minus any fee) immediately so you don’t have to worry about chasing ensuing payments or disrupting your cash flow should you offer it. It’s clear to see why consumers love it—instant gratification. But what’s in it for small businesses? Here are the pros and cons to consider.
Pros of BNPL
There are many positive effects of offering BNPL to acquire and retain customers and generate additional revenue. Specifically, BNPL can help:
Inspire higher-ticket purchases.
Many of today’s customers are more strapped than ever which can make it hard for them to immediately afford your products and services. The BNPL payment offering can help turn browsers into buyers and encourage them to complete the purchase. In turn, you’ll reduce the dreaded cart abandonment shoppers often engage in when they see their cart total. Since you’re paid immediately by the BNPL provider, you don’t have to worry about a hit to your profit despite the extended payments.
Attract loyalty from customers who view your brand as addressing their preferences.
Offering BNPL can help position your brand as modern and forward-thinking as you help them obtain what they need today, even if their finances are currently stretched. For example, many shoppers turn to BNPL as a way to take advantage of a special sales price or pay for a necessary service like a car repair or dental procedure. Whether they are splurging on a gift for a loved one (or even giving themselves a much-deserved treat!) or purchasing a key necessity they otherwise couldn’t afford, they will appreciate the ability to pay with a product that addresses their financial situation.
Further confirm you as a partner of choice.
In today’s competitive environment, small businesses must take every opportunity to show their commitment to their customers’ preferences. Offering flexible payment options that meet the needs of today’s consumer cements your brand as one that understands and cares about their financial realities.
Cons of BNPL
While offering payment choice can promote customer satisfaction, BNPL might not be the right solution for all businesses. Here are some consequences to consider as BNPL could potentially:
Affect your finances.
While it’s true the BNPL provider will pay you in full so you don’t have to wait for the customer to complete the payment schedule, you are liable to be charged a transaction fee, which can potentially squeeze margins. As you research BNPL providers, make sure you get a full picture of any fees you will incur and compare alternatives carefully.
Additionally, while BNPL can spur impulse buys, which can be appealing to your bottom line, the customer might regret that hasty purchase when it eventually arrives, which can lead to the expense and hassle of processing a return.
Create IT issues.
Making a change or addition to your tech stack has the possibility of creating integration challenges with your existing point of sale (POS) system and the other payment methods you offer, which can add an unnecessary IT headache. As you choose a vendor, make sure their software integrates easily with your existing systems. Don’t hesitate to ask questions until you fully understand how a BNPL selection will coordinate within your existing systems.
Generate reputational concerns.
Today’s customer expects a seamless experience no matter where or how they shop—and that includes returns. Because the consumer hasn’t paid in full for the item, they still are in a relationship with the BNPL provider, which could insert friction into the refund and exchange process. To combat this eventuality, make sure you understand how the return process works. You also should prepare for the fact that a customer who has a poor experience with the BNPL provider might inadvertently blame your business.
Also remember this is still a new, largely unregulated industry that is finding its footing. There’s no way of predicting what additional hassles or hurdles might present themselves as it matures. However, just know that given the widespread adoption of BNPL, you will have plenty of company as you navigate any new policies that are bound to arise.
Is BNPL Right for You?
Customers value choice and convenience, and staying on the cutting edge of payment options is vital. Yet not every method might be right for you. Turn to the trusted advisors at American Express Canada who can help you identify the best merchant services for your customer base.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.