Buy Now Pay Later, Something You need to Know

For many consumers in Europe and the Americas, the credit card has been the preferred mode of payment for all their transactions. However, with the upsurge in ecommerce and the proliferation of diverse payment methods, the consumer has been spoilt for choice. Of special mention is the ability to buy now and pay later payment method, which has caught the interest of the millennials and Gen Z, swiftly becoming their “goto” mode of payment.

Buy Now, Pay Later (BNPL) is a short-term financing offering that enables the consumer to place the order for a product, arrange to make payment for it at an agreed later date with no other fees imposed, as long as payment is made promptly, as scheduled. According to Juniper Research, 340 million consumers used BNPL in 2021, with this number expected to go up to 1.5 billion by 2026. Of the total transactions generated using this payment method, more than 24% were attributed to the ecommerce industry.

In the past two years, BNPL has been a popular payment method in Europe, the Americas, South-east Asia and the Middle East. Offered by well-known international brands like Apple, ZARA, Adidas, Nike, and SHEIN, BNPL is also offered by ecommerce titans like Amazon, Walmart, traditional institutions like Goldman, Barclays Bank and Visa have also jumped on the bandwagon to ride this innovative wave.

With economies still reeling from the effects of the global pandemic, the BNPL mode has not only alleviated the pressure on the consumer but also enabled the merchants to sell more and generate increased revenue.

According to a report published by RBC Capital, the BNPL mode has brought about an increase in conversion rate for merchants by about 20% to 30%. In 2021, merchants who offered BNPL to their customers saw their revenue increase by 41% year over year. This figure is expected to be doubled by 2024.

Klarna, the Trail Blazer in BNPL

Klarna, a founding enabler, is the biggest provider of the BNPL payment method in Europe. With an active base of 150 million consumers, Klarna offers BNPL to more than 450,000 merchants across 45 countries and regions.

Sebastian Siemiatkowski, the co-founder and CEO of Klarna once said: “By leveraging the conversion rate, average order value and sales revenue, Klarna managed to establish value-added relationships with the merchants while at the same time offering the consumer the ultimate shopping experience.”

Focusing on meeting the shopping and payment needs of consumers from diverse backgrounds, Klarna launched an array of payment products that included Pay Later, Pay Now and Financing.

Pay Later : In some regions, the consumer could either opt to make full payment for the product 30 days after it has been delivered or split the amount into 3 or 4 interest-free payments with no further fees imposed. (Unless additional expenses have been incurred due to delayed or non-payment.)

Pay Now: Once the consumer has decided on the product to be purchased, they would make payment immediately using their credit card.

Financing: Once the consumer has placed the order, they could apply for short-term financing with flexible interest rates.

With its rapidly increasing popularity, the BNPL payment method has inadvertently become the link between the consumer and the merchant. It is only a matter of time when BNPL will eventually become a key payment method. In our continual quest to cater to the dynamically changing needs of our merchants and customers, Oceanpayment has launched Buy Now, Pay Later products and services in Europe, the USA and South-east Asia, offering our cross-border merchants a secure and convenient one-stop solution that attracts more and diverse consumers, and maximizes conversion rates.