In business, you’ll frequently encounter customers who’ll want to buy from you, but can’t. Not due to any fault of your own, but because they themselves don’t quite have the budget.
You don’t have to let them go.
We may receive compensation from the tools featured in this guide. However, we do not recommend any tools or services that we do not use in our businesses, have not fully evaluated, or that are not successful for our clients.
What is Buy Now Pay Later?
Buy Now, Pay Later (BNPL) is an alternative financing option that allows consumers to purchase everyday items now but finance the purchase and pay over time.
By offering a buy now pay later option as a brand owner, you give your customers the flexibility to pay for their order over time but you get the luxury of receiving the payment upfront, in full.
Why You Should Use A Buy Now Pay Later Tool
Pricing is one of the major obstacles customers encounter during purchasing. Removing that obstacle by facilitating the customer to pay in smaller chunks can make it easier for them to do business with you.
For you and your business, this can lead to positive outcomes, such as:
- Increased conversion rates: If your customers’ only option is to pay outright in order to buy from your store, this could lead to price shock and thus, a dreaded abandoned cart. Offering a BNPL option simplest the purchasing decision for the customer and can increase conversion rates up to 30%.
- Cart abandonment: A BNPL solution minimises the ‘risk’ or ‘guilt’ of paying big amounts, and thus reduces cart abandonment because customers feel more comfortable with their purchasing decisions.
- Increase in average order value: When you allow customers to complete big purchases in small installments, this makes them more confident in buying higher priced items from you.
What’re the Best Buy Now Pay Later Tools for Shopify?
Sezzle lets your customers pay for their order in 4 easy monthly installments. For example, let's say your customer’s order is $100. This will be split in 4 monthly payments of $25.
The best part of Sezzle is that it doesn’t look at a customer’s credit score. Instead, they only look at the bank statement. This potentially opens up your Buy Now Get Later services to an even bigger audience (while still checking for any red flags). And that’s not all, Sezzle pays you on behalf of the customer, so you don’t have to worry about your cashflow being disrupted. Instead, Sezzle puts it upon itself to collect the monthly payments from your customers.
Klarna is another well-known Buy Now Pay Later solution that’s popular in the US, and other countries too. It boasts a network of over 90m global shoppers, so shoppers will be familiar with the option and it’ll expand your viable customer base.
In addition to the option of paying in 4 monthly payments just like Sezzle, it lets you offer customers the option to make a delayed full payment i.e. in 30 days.
Klarna also offers a financing option. With this, customers can make big purchases which they can repay within 24-36 months.
And like Sezzle, Klarna takes responsibility for taking the repayments for a customer, meaning you get paid for the full amount without having to assume the risk.
Affirm is another solid buy now pay later solution. On average, Affirm customers see 85% lift in AOV and a 20% repeat purchase rate. Further, they have a shopper network of over 6m shoppers that you can tap into.
When customers checkout on your website, it will offer them the ability to pay in 3, 6, or 12 monthly payments and will display an Adaptive Checkout - an advantage for retailers is that Affirm will make sure to suggest a time-period that increases the chance of customers committing with you.
Something to keep in mind with Affirm is that it charges customers with an interest rate ranging from 0% ARR to 30% ARR. According to the company, more than 40% of purchases made through it have 0% APR.
Last but not least, payments up-to $17500 are allowed if a customer qualifies, which means Affirm can help finance your customer’s bill even if you sell high priced goods.
Zip is another well-known Buy Now Pay Later solution. In its most popular plan, it allows your customers to pay for items up-to $1000 in four installments, interest free. However, a $1 verification fee is charged in each installment.
25% is taken as a down payment, and the rest of the repayment will be processed in two week intervals. There are no late fees, but if your monthly statement isn’t clear by the end of the month, a monthly account fee of $7.95 is charged.
Payments made via Zip by your customers are transferred to your bank account on a daily basis, and there is no minimum transaction limit.
To process your payments, Zip simply charges a small fee on each transaction, which decreases based on how many transactions take place on your website. At the maximum, only a 30c transaction fee is charged.
Afterpay also lets customers pay for the purchases in a bi-weekly fashion and monetizes by charging late fees. It has over 16m shoppers in its network and approves 90% of customers to shop.
But for retailers, there is a $30c + 4-6% merchant fee on all transactions. Other than this, both Mastercard and Visa are accepted, and payments are processed into the retailers’ bank accounts as soon as it is approved by Afterpay.
Shop Pay Installments
If you have a Shopify store, and want to get comfortable in their garden completely, you can use Shopify’s own Shop Pay Installments service. What’s important to note is that this isn’t a service run by Shopify themselves - instead it is run in partnership with Affirm, a Buy Now Pay Later solution we’ve discussed above.
However, what makes this buy now pay later integration different is that since it is offered by Shopify, they promise tighter integration with Shopify stores, and hence, you can expect better performance and loading times. This is an underrated factor that also plays a big part in improving conversion rates.
Lastly, as per Shopify, its Shop Pay service already boasts 60M users which means online shoppers who go to your Shopify website may just be already signed up to use Shop Pay.
BNPL is the new trend
Any brand running on Shopify now can offer Buy Now Pay Later solutions to their customers. Especially proven to be effective with younger people, this type of service is a must-have for your Shopify store as it makes paying for items more convenient and flexible, and for you, helps you win sales from even more customers.