# Weighing up Buy Now, Pay Later: What you need to know before you invest Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-05-18 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Accelerate Ecommerce Growth with Buy Now, Pay Later Trends Meta Description: Discover how adding Buy Now, Pay Later as a payment option can boost revenue & average order value. Learn the benefits & risks in implementing BNPL on URL: https://financedigest.com/weighing-up-buy-now-pay-later-what-you-need-to-know-before-you-investhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/what-you-need-1736838323052-compressed.jpg) _By **Eric Christensen,** Chief Payments Officer/Vice President of Product,_ [_Digital River_](http://digitalriver.com/) The global pandemic has dramatically accelerated the long-term consumer shift towards ecommerce channels. While the initial explosion in online shopping came out of necessity, with social distancing and shielding requirements restricting people’s ability to shop in store, it is safe to say the trend of online buying isn’t going anywhere. Not only did consumers grow more comfortable with online shopping in 2020, they also drove the adoption of new payment methods for the benefit of shoppers and businesses alike. With more consumers adopting ecommerce as part of their shopping habits, online [payment strategies have become](https://www.financedigest.com/why-payments-have-become-the-next-battleground-for-banks.html "Why payments have become the next battleground for banks") more important than ever. How merchants accept, process, reconcile and manage payments, especially on a [global scale](https://www.financedigest.com/managing-flexible-working-on-a-global-scale.html "Managing flexible working on a global scale"), has a direct impact on conversions and revenue. One [payment method](https://www.financedigest.com/freelancer-payments-methods-what-you-should-know.html "Freelancer Payments Methods: What You Should Know") experiencing tremendous growth in customer adoption is known as Buy Now, Pay Later (BNPL), an option that allows consumers to pay for goods and services in instalments over time, often without interest. According to [one recent analysis](https://www.openpr.com/news/2124412/buy-now-pay-later-platforms-market-analysis-and-forecast-2020), the global BNPL platforms market was valued at over £5.2 billion in 2019 and is expected to reach over £24 billion by 2027. A new report commissioned by Klarna, has [revealed](https://www.klarna.com/international/press/consumers-turn-to-bnpl-for-flexibility-and-security-as-retail-readies-for-recovery/) that BNPL accounted for almost 4% of all online retail sales in the UK in 2020 with over 10 million users. Paying in instalments is not a new concept; however, recent [financial technology has helped to develop](https://www.financedigest.com/financial-services-technology-development-in-2023.html "Financial Services technology development in 2023") a risk algorithm that is making the method more profitable for merchants. At the same time, Gen Z and Millennial generations are demanding choice and tend to be more careful about using traditional credit cards. The current economic [climate is expanding the audience for instalment plans](https://www.financedigest.com/climate-activists-plan-daily-protests-after-blocking-10-uk-oil-terminals.html "Climate activists plan daily protests after blocking 10 UK oil terminals") to Gen X and Baby Boomer shoppers who might previously have been uncomfortable with the idea. Individuals laid off or furloughed are likely to be very conservative when it [comes to spending and BNPL offers those consumers the ability to control payments](https://www.financedigest.com/e-commerce-without-frontiers-not-when-it-comes-to-payment-2.html "E-commerce without frontiers? Not when it comes to payment") and avoid putting a large purchase on a credit card where they might also incur interest charges. It also gives consumers the [ability to buy something now rather than having to save](https://www.financedigest.com/student-loans-hurting-workers-ability-to-save-for-retirement.html "STUDENT LOANS HURTING WORKERS’ ABILITY TO SAVE FOR RETIREMENT") up for it. While more consumers and even B2B customers are looking for BNPL, merchants must carefully [consider the benefits and risks of implementing this option](https://www.financedigest.com/7-finance-career-options-to-consider-and-what-you-need-to-know-about-each.html "7 Finance Career Options to Consider and What You Need to Know About Each") before adding it to their online stores. **The pros** One of the biggest attractions for brands looking to add BNPL as a [payment option is the opportunity](https://www.financedigest.com/digital-payments-an-explosion-of-emerging-opportunities.html "Digital Payments: An Explosion of Emerging Opportunities") to increase revenue. [Digital River found brands](https://www.financedigest.com/digital-marketing-trends-that-will-change-how-brands-operate-in-2021.html "Digital Marketing Trends that will change how brands operate in 2021") in the U.K. and Europe saw a 3 percent to 10 percent lift in gross revenue after adding a buy now, [pay later](https://www.financedigest.com/the-pros-and-cons-of-buy-now-pay-later.html "The Pros and Cons of Buy Now Pay Later") option. Another [benefit is the potential increase](https://www.financedigest.com/benefits-of-increasing-blog-traffic-with-guest-blogging-and-posting-service.html "Benefits of Increasing Blog Traffic With Guest Blogging and Posting Service") in average order value (AOV). It’s a key selling point for payment providers, including PayPal, which touts at [56 per cent increase](https://www.paypal.com/us/business/enterprise/buy-now-pay-later) in AOV with pay-over-time messaging. Other benefits involve what happens after the transaction. Among them, the BNPL provider assumes the risk of non-payment and remits funds at the time of shipment, making the merchant whole immediately. **Potential obstacles** A major consideration for merchants is potential [revenue lift might not exceed](https://www.financedigest.com/box-and-carton-overwrap-films-revenue-to-exceed-us-5-9-bn-in-2019.html "Box and Carton Overwrap Films Revenue to Exceed US$ 5.9 Bn in 2019") the increased cost of offering BNPL financing. A merchant generally pays a third-party [financial technology](https://www.financedigest.com/technology-trends-heat-up-for-financial-firms.html "Technology trends heat up for financial firms") provider a certain percentage per transaction. As such, merchants [need to make sure](https://www.financedigest.com/need-additional-funding-but-not-sure-how-to-go-about-it.html "Need additional funding but not sure how to go about it?") the margin on the product is big enough to withstand that fee. If a merchant is geared toward selling smaller items that won’t produce that margin, they can consider adding a different payment method like one-touch purchasing to encourage purchases. Another concern is BNPL financing might be confusing for some [consumers who aren’t as familiar with technology and prefer a more traditional buying](https://www.financedigest.com/from-burgers-to-bleach-stressed-consumers-buy-cheap.html "From burgers to bleach, stressed consumers buy cheap") experience. To avoid any confusion or concern, make sure you proactively educate consumers with on-site messaging to make them more comfortable using new payment methods. [Buy now pay](https://www.financedigest.com/beat-the-exchange-rate-and-buy-that-dream-holiday-home-by-paying-in-pounds.html "Beat the exchange rate and buy that dream holiday home – by paying in pounds! ") later isn’t for everyone, and you should carefully weigh the pros and cons before investing. However, by implementing the right payment methods and setting up responsible terms, [retailers can both improve metrics such as conversion](https://www.financedigest.com/how-offline-conversion-will-help-retailers-sell-more-in-2023.html "How offline conversion will help retailers sell more in 2023 ") rate and AOV, as well as improving the customer experience. Creating this seamless ecommerce journey is a win for every party involved – including you. _**About the Author:**_ Eric Christensen is Chief Payments Officer at [Digital River](https://www.digitalriver.com/), a completely integrated solution for all the back-office functions of ecommerce. Digital River enables [businesses to sell](https://www.financedigest.com/reasons-why-you-should-hire-a-business-broker-to-sell-your-business.html "Reasons Why You Should Hire a Business Broker to Sell Your Business") across the world with a single connection to the platform of your choice. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---