Post by nurnobisorker14 on Oct 30, 2024 5:18:55 GMT
New BNPL services for convenient payment of orders have appeared on the online market. Let's figure out how the new product differs from the standard installment plan, and what are the strengths of each tool for store owners.
Contents hide
1) Differences between BNPL and installment payments
2) BNPL services for online stores
3) Installment plan for online store
4) Pros and cons
4.1) Installment
4.2) BNPL
5) Conclusion
Differences between BNPL and installment payments
The "buy now, pay later" service provides for payment for goods in equal installments over a fixed period. The first payment is debited at the time of ordering from the card bulk email campaigns that was linked to the personal account. Its size is 25% of the amount.
Purchasing goods in installments means that the buyer pays the amount in parts over a certain period of time without commission. Usually there is no down payment.
Let's highlight the main differences between the "buy now pay" service and purchases in installments:
The BNPL service does not require a credit agreement. This means that the applicant's credit history is not analyzed, and information on payment discipline is not transferred to the credit bureau. As a result, the target audience expands, the average check, conversion, and volume of spontaneous orders increase. There are no risks for retailers, since they receive money for the sale the next day minus the operator's commission. When paying by installments, the debt burden, borrower rating, and the presence of unpaid debt on financial obligations are taken into account. Not every applicant has a chance of concluding an agreement.
Both methods are free for the client. The term provided by the "buy now, pay later" service is shorter than with the analogue. The order amount is divided into 4 equal payments of 25%.
If the payment is not made on time, fines and penalties are charged. Usually, for an interest-free loan, they are higher than for BNPL, and a violation of obligations threatens a deterioration in the credit rating or inclusion in the bank's blacklist. The new service is not regulated at the legislative level.
The geography of application of the new model is limited for now. Some online stores are wary of the innovative solution.
Use BNPL with Mokka
BNPL services for online stores
The growing popularity of BNPL in the international market allows this service to be singled out as a separate payment method, along with debit and credit cards, electronic wallets. It uses a new method of assessing the client's solvency: by mobile number and full name. No other information is requested, financial statements are not required. After placing an order, the buyer immediately receives the goods in the chosen way.
The payment algorithm is simple. It includes the following steps:
familiarizing the visitor with the catalogue;
selecting products and adding them to the shopping cart;
placing an order with the item “deposit funds through a BNPL provider”;
Enter your last name and mobile phone number;
linking a bank card for a one-time debit of the first installment;
control over payment deadlines via the application.
The share of BNPL payments in the world, according to a study conducted by Worldpay, was 2.1% in 2020. According to forecasts, this value will grow by 5.5-7 times in 2023. The market is actively developing in North America and Europe. The greatest effect from the tool is observed in Spain, Singapore and Brazil. For domestic companies, this model is still at the implementation stage, but positive dynamics have already been recorded.
The potential client profile is represented by applicants aged 18 to 46 who are against paying with credit cards or loans. This is the most active target audience, so the model under consideration has every opportunity for development.
Installment plan for online store
New service providers are appearing on the installment market, which is developing competition and creating favorable conditions for users. Most often, clients use cards (digital or plastic). Unlike credit cards, they have a longer interest-free repayment period, and the amount of the installment is agreed upon in advance.
In the context of declining incomes, banks consider installment payments as a tool for expanding the customer base and reducing the risk of default by potential borrowers. They compensate for their share of the profits through commission income received from the store. If financial obligations are fulfilled on time, banks offer other marginal products to this target audience: loans, mortgages, life and health insurance, etc.
Users are attracted to this financing option due to:
simplicity and clarity (the annuity scheme precisely fixes the amount of the monthly payment);
early repayment options;
absence of overpayment (if obligations are fulfilled on time, the client is confident that he will not be deceived);
efficiency of registration;
complete confidentiality (no guarantor required).
Connect Mokka and sell more
Pros and cons
Each service has its own advantages and disadvantages, which are important for the owner of an online store to evaluate before concluding an agreement.
Installment plan
Pros:
Increasing customer loyalty. Some users are initially set up for an interest-free loan, especially when buying expensive goods online. It is easier for them to make a certain payment per month than the entire amount at once.
Increased sales. Implementation of the tool in a number of categories increases the number of orders and the average check.
Improving the store's ranking in search results. According to statistics, customers more often go to sites with the option to buy on credit.
Cross-sell growth. This is especially evident when displaying offers at the checkout stage.
Contents hide
1) Differences between BNPL and installment payments
2) BNPL services for online stores
3) Installment plan for online store
4) Pros and cons
4.1) Installment
4.2) BNPL
5) Conclusion
Differences between BNPL and installment payments
The "buy now, pay later" service provides for payment for goods in equal installments over a fixed period. The first payment is debited at the time of ordering from the card bulk email campaigns that was linked to the personal account. Its size is 25% of the amount.
Purchasing goods in installments means that the buyer pays the amount in parts over a certain period of time without commission. Usually there is no down payment.
Let's highlight the main differences between the "buy now pay" service and purchases in installments:
The BNPL service does not require a credit agreement. This means that the applicant's credit history is not analyzed, and information on payment discipline is not transferred to the credit bureau. As a result, the target audience expands, the average check, conversion, and volume of spontaneous orders increase. There are no risks for retailers, since they receive money for the sale the next day minus the operator's commission. When paying by installments, the debt burden, borrower rating, and the presence of unpaid debt on financial obligations are taken into account. Not every applicant has a chance of concluding an agreement.
Both methods are free for the client. The term provided by the "buy now, pay later" service is shorter than with the analogue. The order amount is divided into 4 equal payments of 25%.
If the payment is not made on time, fines and penalties are charged. Usually, for an interest-free loan, they are higher than for BNPL, and a violation of obligations threatens a deterioration in the credit rating or inclusion in the bank's blacklist. The new service is not regulated at the legislative level.
The geography of application of the new model is limited for now. Some online stores are wary of the innovative solution.
Use BNPL with Mokka
BNPL services for online stores
The growing popularity of BNPL in the international market allows this service to be singled out as a separate payment method, along with debit and credit cards, electronic wallets. It uses a new method of assessing the client's solvency: by mobile number and full name. No other information is requested, financial statements are not required. After placing an order, the buyer immediately receives the goods in the chosen way.
The payment algorithm is simple. It includes the following steps:
familiarizing the visitor with the catalogue;
selecting products and adding them to the shopping cart;
placing an order with the item “deposit funds through a BNPL provider”;
Enter your last name and mobile phone number;
linking a bank card for a one-time debit of the first installment;
control over payment deadlines via the application.
The share of BNPL payments in the world, according to a study conducted by Worldpay, was 2.1% in 2020. According to forecasts, this value will grow by 5.5-7 times in 2023. The market is actively developing in North America and Europe. The greatest effect from the tool is observed in Spain, Singapore and Brazil. For domestic companies, this model is still at the implementation stage, but positive dynamics have already been recorded.
The potential client profile is represented by applicants aged 18 to 46 who are against paying with credit cards or loans. This is the most active target audience, so the model under consideration has every opportunity for development.
Installment plan for online store
New service providers are appearing on the installment market, which is developing competition and creating favorable conditions for users. Most often, clients use cards (digital or plastic). Unlike credit cards, they have a longer interest-free repayment period, and the amount of the installment is agreed upon in advance.
In the context of declining incomes, banks consider installment payments as a tool for expanding the customer base and reducing the risk of default by potential borrowers. They compensate for their share of the profits through commission income received from the store. If financial obligations are fulfilled on time, banks offer other marginal products to this target audience: loans, mortgages, life and health insurance, etc.
Users are attracted to this financing option due to:
simplicity and clarity (the annuity scheme precisely fixes the amount of the monthly payment);
early repayment options;
absence of overpayment (if obligations are fulfilled on time, the client is confident that he will not be deceived);
efficiency of registration;
complete confidentiality (no guarantor required).
Connect Mokka and sell more
Pros and cons
Each service has its own advantages and disadvantages, which are important for the owner of an online store to evaluate before concluding an agreement.
Installment plan
Pros:
Increasing customer loyalty. Some users are initially set up for an interest-free loan, especially when buying expensive goods online. It is easier for them to make a certain payment per month than the entire amount at once.
Increased sales. Implementation of the tool in a number of categories increases the number of orders and the average check.
Improving the store's ranking in search results. According to statistics, customers more often go to sites with the option to buy on credit.
Cross-sell growth. This is especially evident when displaying offers at the checkout stage.
