We all have come across dozens of kirana stores that accept UPI payments (finally) and have got onboard the bandwagon of creating a less-cash future. Even street vendors have adopted UPI payments, which is testament to the attempts made to include people from all sections of the society.
Online platforms, given their scale and their popularity among the younger generation, were quick to embrace UPI and other payment methods for their lakhs of customers. But the newest one in the list of payment options is ‘buy now, pay later’, or shortly, the pay later app.
Do online sites need another payment mode?
When we have cash on delivery, debit and credit cards, the platforms’ own wallets, was there really a need to have another one in the list?
As it happens, people who search for their favorite products online tend to ‘add to cart’-zone them. We mean, they would abandon the filled up shopping cart because, guess what, they are short on cash! A fundamental issue.
The tendency to buy things when they are ‘on sale’ or at discounted rates is just like gravity. All that the shoppers need is a gentle push. BNPL did that job for the e-commerce sites.
Significance of having BNPL as a payment mode
Merchants and ecom sites always try to increase their sales. But not every prospective customer will have enough money throughout the month and it is this majority group of customers that benefit the most from this new payment mode.
This is exactly what the ecom shopping sites needed to tap into that portion of customers by making it more affordable for all of them and creating a bigger customer base.
Another important thing to be noted here is that to stay relevant with time and survive the cut-throat competition, merchants and ecom sites HAD to adopt this. Because there are multiple alternatives for customers.
Brand loyalty is something these shopping sites can’t expect from their customers. At the end of the day, MRP will be given more importance than sticking to one merchant or platform.
Most people tend to assume that the actual seller of the product will be paid for the products over a period of 3-4 months in installments. THIS IS FALSE.
The sellers are paid in full at the time of purchase by the BNPL partner after deducting a small fee for helping the sale take place and it’s them who will take the responsibility of managing everything related to the payments.
Benefits for merchants and ecom that have BNPL
1. Increase in sales
This is the primary objective for any merchant. By providing an additional payment option, they make it easier for their customers to shop for their favorite product.
2. Rise in number of new customers
Since it is not enough for any seller to sustain in the long run by depending on the existing customers, they need customers for the future as well. An incentive to buy products at one-fourth or one-fifth of their cost is too good for any customer to miss out on. Of course, the provider of the BNPL service may have also partnered with a host of sellers, merchants and ecom sites, but the chances of any of those merchants losing out on their sales target is extremely unlikely because customers like it more when their wishlist is being ticked off.
3. More ‘paying’ customers
A merchant or an ecom site would want to have more and more customers who actually transact. They need more customers who don’t just fill their shopping cart, but also ‘proceed to pay’. Because, you know why.
4. An increase in sales of high-value products and average purchase size
The best use of a service like BNPL is the affordability it offers for products of high value. For anyone smart enough to know how to manage their money, they rather use BNPL which offers deferred payments at zero or negligible interest rates than pay the entire amount at one go even when they can afford to do so.
5. Staying relevant
By adopting a new payment option, merchants and ecom sites can not only show that they are tech-savvy and value their customers’ convenience, they are in a way, wooing the customers with one extra reason to shop more from them.
6. Survive the competition
When there are so many options available for customers for their various needs, one better than the other in some or the other aspects, sellers need to be proactive to pip their competitors and remain in the minds of customers.
A deferred payment option is one of the most attractive options to retain a good number of customers.
Way forward for online sales
At a time when almost everything is becoming accessible for more and more people, technology can be the enabler and money, a medium.
It offers a great deal of flexibility to the masses with respect to their finances and at the same time, strengthens the customer-merchant relationship because it is ‘convenience’ that is offered in the form of BNPL.