Buy Now Pay Later | How Online Payments & Ecommerce Are Changing

Buy Now Pay Later

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If you’re a fan of shopping online, you may have come across a ‘buy now pay later’ scheme. This service allows people to buy a product immediately and pay for it in smaller monthly installments. In a cost of living crisis, spreading the cost of large purchases is a very attractive option.

Does a change in the way that we pay for products and services change the way that we view our finances? Search4Local have done some investigation to find out more about the effect that buy now pay later (or BNPL) has had on shoppers…

The Rise Of Digital Banking

As we move towards a digital future, online banking has become an essential. It’s really convenient to have the power to carry out banking services on your smartphone. However, that convenience has made significant changes to our high street. By the end of 2023, it’s estimated that 206 bank branches will have closed their doors. This leaves some vulnerable people cut off, and makes accessing and depositing cash a lot more difficult.

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Online Banking Vs High Street Banking

The Benefits Of Buy Now Pay Later

Both business and consumers will benefit from the freedom to make purchases instantly and pay for them later. Whether it’s because a customer needs to wait for payday, or that they simply need to spread the cost to afford something, BNPL offers a freedom that traditional payment methods do not. This is because BNPL tends to have no interest, whereas credit cards and loans can make borrowing money cost considerably more.

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Klarna is the biggest name in BNPL today. Users like it because it’s zero interest and allows them to make purchases on a wide range of sites. Other benefits include instant refunds when processing returns, the ability to pay the loan off early without penalty and free 7-day extensions if you need to push a payment back.

With new regulations in place to protect UK consumers, BNPL has become a very attractive way to pay.

How Does BNPL Make Money If It’s Zero Interest?

To answer this question, we looked at Klarna’s website. They explained that the retailer pays a small fee for their customers to use their services. This works in a similar way to how credit and debit card fees work. Therefore, it shouldn’t be any more or less expensive for a business to work with Klarna than it is to accept most major credit cards.

The Drawbacks Of Buy Now Pay Later

Credit is not always easy to use responsibly. BNPL could cause problems when consumers are unable to make repayments. Late or failed payments can negatively impact your credit score, which can affect your ability to get phone contracts and mortgages.

Being Responsible With Money

For some, being able to ‘afford’ luxury items by spreading the cost could be too much temptation. If you’re not mindful of how many BNPL services you use at once, you could rack up some sizeable monthly payments.

A lot of these companies are designed to be highly attractive to young people. Klarna operates on many clothing sites, making it easy to overspend on non-essentials. The ease of BNPL leaves some consumers more vulnerable to impulse purchases than usual, leaving payment as an afterthought.

Late Payment Fines Are Coming

If you miss an instalment, you will likely face a fee. These fees are relatively low, usually no more than £10. However, some BNPL services will also report to credit companies. This means that a missed repayment could have a negative impact on your credit score. It’s always a good idea to stay on top of payments, regardless of what the consequences are. Put simply, don’t buy what you can’t afford to pay for – whether that’s in one, two or three payments.

Late Payment Fine

Is Buy Now Pay Later A Good Idea?

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On the surface, BNPL’s ‘new’ way to pay is a great option. It’s zero interest and gives people the freedom to make purchases before payday. However, whether it’s suitable for you will be a personal decision. If you know that you might risk missing payments or taking out more BNPL loans than you can afford, it might be best to avoid using this service.

If you run an online business or ecommerce website, you might want to consider working with a BNPL provider. This lets your customers to pay for things more flexibly. Allowing your buyers to spread the cost means that you might make more sales and reach a wider audience with your services. It’s convenient, easy to access and is a great solution for those who need a little more time to make full payment for a product.


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