The Pros and Cons of Buy Now, Pay Later

Buy now, pay later (BNPL) purchasing options—like Klarna, Affirm, and Afterpay—have made their mark in the world of e-commerce. However, many shop owners are still working to introduce these popular payment options. If you need more clarification on BNPL, SamCart is here to help. Let’s take a look at some of the greatest pros and cons of buy now, pay later.

The Pros of Buy Now, Pay Later

Ease and Transparency

Buy now, pay later services have quickly earned praise for their upfront cost transparency. Data from Insider Intelligence reports that 41.8% of consumers prefer BNPL options thanks to “clarity of fees or interest rates.” Meanwhile, C+R Research says that a majority of consumers (56%) chose BNPL checkout options—most commonly for their ease of making payments and enhanced flexibility.

More Customer Buying Power

Buy now, pay later options have become favored for a reason: customers enjoy access to a higher buying power with minimal hassle. By offering BNPL options in your online store, you can help customers buy more. BNPL is beneficial for both buyers and sellers.

• Buyers can access all the purchases they need—when they need them. Buy now, pay later lets customers seamlessly checkout from your online store without looking for backup payment options or checking to see if their paycheck has cleared the bank.
• Sellers can maximize average order value to increase profits. For physical product sellers, this will also ease the shipping and packaging costs by helping customers meet all their needs with each transaction.

Customer Financial Control

When customers want or need online purchases, they may find financial stress holding them back. Since BNPL options divide a customer’s purchase across four easy payments, buyers can access much more financial control. With installments due every two weeks, this requires just one small payment per standard bi-monthly paycheck instead of one large sum.

No Fees or Interest

Buy now, pay later can provide the payment flexibility of a credit card without unnecessary costs. When customers make their scheduled payments on time, BNPL options will not charge interest or fees. However, providers often charge late fees for missed payments. Additionally, many BNPL providers offer extended financing beyond the traditional “four easy payments.” These financing options work more like credit cards, including extended installments and interest rate charges. However, the traditional BNPL loan term will not include any interest rates or fees.

The Cons of Buy Now, Pay Later

Customers can easily fly too close to the sun if they are not careful with buy now, pay later options. So let’s take a look at some of the cons of BNPL.

Overspending and Buyer’s Remorse

BNPL options can help improve a customer’s financial situation by letting them spread a purchase cost across multiple paychecks. However, some users have reported that buy now, pay later options have empowered them to spend more than they can afford. According to Bankrate, 57% of consumers regretted a buy now, pay later purchase because “it was too expensive.”

Late Fees and Financial Distress

Overextended budgets can bring on even more financial burdens for buy now, pay later customers in the form of interest, late fees, or credit score damage. The Consumer Financial Protection Bureau (CFPB) investigated these concerns. Their report states that BNPL consumers, on average, were “much more likely to be highly indebted, revolve on their credit cards, have delinquencies in traditional credit products, and use high-interest financial services.” However, the CFPB report also notes that financial distress was apparent for these consumers before the introduction of BNPL. More research is needed to determine whether buy now, pay later “improves the financial health of consumers in distress or exacerbates these differences.”

Recurring and Subscription Purchases

As customers are eager to commit to BNPL options, they might be disappointed to find that they are incompatible with certain charges—such as subscription services. Buy now, pay later services are short-term, interest-free installment loans. As with most loans, the buyer’s eligibility, terms, and conditions must be approved at the point of sale. As such, they can complicate pre-set recurring charges—such as that found in memberships and subscriptions.Accepting a customer’s preferred payment option is crucial in optimizing and automating checkout processes. According to data from C+R Research, 56% of users prefer the buy now, pay later options, and 38% of users expect BNPL to replace their credit cards. Thankfully, there are signs of future compatibility. Afterpay, for example, recently started supporting subscription service payments with select merchants. So it is likely that payment compatibility will eventually follow for small businesses and online creators.

Flexible E-Commerce Payment Options With SamCart

SamPay by SamCart helps sellers offer flexible payment options—including buy now, pay later. Combined with our advanced suite of e-commerce features, SamCart makes it easier than ever to sell online. We invite you to try SamCart for free with a trial today!