Buy Now, Pay Later Is Something More Than a Payment Method for SMB Lending

Though Buy Now, Pay Later (BNPL) mostly relates to the consumer benefits coming from providing a flexible method of payment, there’s a profitable use case for business for driving growth, as well. The installment purchase plans for spreading payments are providing traffic to both digital and physical stores.

One of the reasons why small businesses prefer to use BNPL is that it is not just a payment method. It is also a way for SMBs to attract customer traffic, especially millennials and Generation Zers who are more and more inclined to make global online spending.

BNPL vs. bailout

There is a unique benefit enabling BNPL to play a crucial role in the survival strategy for thousands of small and medium businesses during the COVID-19 outbreak. BNPL has become a lifeboat for thousands of SMBs which have been pushed to the brink of extinction and were relying on government loans or stimulus funds to survive.

Some of the survival stories tell about small businesses capable of adapting to new trends faster than the others. BNPL was a part of those trends, allowing payment in installments online and in stores and providing payment flexibility. And small businesses were taking advantage of that.

The most attractive feature of BNPL is that it provides people with more versatility over their payments without actual necessity to pay. The Buy Now, Pay Later method doesn’t aim at making money through charging businesses interest but providing them with opportunity to sell.

Merchants are ready to pay

While the BNPL payment method doesn't mean charging consumers fees, merchants are charged instead. But they are happy to pay because it adds value.

The value comes in the form of the huge amount of new business driven by BNPL to merchants. If merchants didn't offer the fast-growing payment method, businesses might have passed by. By providing omnichannel payment opportunities to customers who shop both online and offline the amount of spendings becomes significantly higher in terms of purchase volume than that of online-only shoppers.

In this regard arises yet another challenge - affordable end-to-end lending software which can streamline the BNPL and make commission go down. Achieving this through robotic process automation and decrease of operational expenses.

BNPL will only grow in numbers

In the following years, BNPL's importance will only grow for SMBs strategies. Over the past year, Buy Now, Pay Later payments volume grew by 230 percent. That was much faster than traditional debit cards with just 43 percent growth, and credit cards with growth stuck in the single digits.

Majorly, the growth is driven by millennials and Generation Z which is very good news for small businesses because those generations prefer  shopping at smaller retailers. They really like to purchase unique things that no one else can get.

Moreover, Generation Z and millennials are expected to account for 50 percent of all global spend by 2030. Seeing such growth rates, it is right to admit that BNPL will penetrate more and more as a payment method with respect to the total payments pie. As the share of millennials and Generation Z will more and more prevail in society, it’s definitely going to be a promising picture for SMBs.

Responsible debt instead of good or bad debts

There's one scenario that could possibly limit the growing dominance of BNPL in the field of payments. That is if too many of those younger consumers end up getting themselves in trouble. What if shoppers are not aware of the risks of taking on too many installments? And what happens if they miss a payment? These are the favorite questions asked by those who criticize BNPL. They say that there is a danger that shoppers could run up debts they’re unable to repay.

But the figures point out that BNPL’s repayment rates are far better than those in traditional financing schemes. It is mostly because about 90 percent of all transactions are made with debit cards. It means that people pay by using the money they already have. Statistically, over 90% of BNPL customers haven't ever had late fees, and a third of shoppers actually pay back early.