‘Should I offer buy now pay later options on my website?’ This is actually a question I have been asked a few times recently by customers so I thought I would invest some time in actually getting my response written down.
My answer is ‘Maybe’ …… Let me explain
By now it should be universally accepted that choosing the right payment options for your customers is crucial as it helps increase sales and improve the overall customer experience. To illustrate how big this is Stripe recently reported that 16% of customers are lost at the Payment Page due to unsuitable payment methods.
One payment option that has gained popularity in recent years is Buy Now Pay Later from services like Affirm, Klarna, Afterpay etc.
There are a number of differences in their product offerings but in general they offer a range of payment options, including buy now, pay later and instalment plans. Here are the most important factors to consider when deciding whether to offer one of them as a payment option.
Customer demographics: The different Buy Now Pay Later solutions all have different customer bases be that segment or region. Affirm is predominantly US focused, Afterpay (recently rebranded Riverty) is more commonly used by a more mature customer group whilst Klarna is especially popular among younger consumers, who may be more likely to prefer flexible payment options.
So for example If your target audience includes millennials and Gen Z then offering Klarna can help attract these customers and increase sales. Other Buy Now Pay Later solutions are more popular with different segments and different regions.
Order value: Offering Buy Now Pay Later solutions can be particularly useful for merchants with high-value products. By allowing customers to spread out their payments, Buy Now Pay Later solutions can make it easier for customers to make purchases that they might not be able to afford in one lump sum.
Cart abandonment: High cart abandonment rates can be a major issue for online merchants. By offering Buy Now Pay Later solutions, merchants can provide customers with an alternative payment option that may help reduce cart abandonment rates.
Competition: If your competitors are offering Buy Now Pay Later solutions it may be necessary for you to offer it as well in order to remain competitive.
So why do I answer maybe?
Well it’s important to consider the potential downsides of offering these services. With the biggest being the fact they charge larger fees to merchants, which can cut into profit margins.
My advice is always to do your research and answer these questions first-
- Look to see where you are loosing customers during your sales funnel, if you only loose a few percent on the payment page then prioritise other solutions. If you don’t know this answer then look into how you can establish this, we are happy to do a one off analysis for free or give recommendations on more long term reporting solutions.
- What is the demographic of those customers that drop off?
- What is the fraud risk of the drop off segment?
- Do the financials make sense to offer a Buy Now Pay Later service given the life time value of a customer and the cost of acquisition etc
I am pleased to advise that we at FERO can help you not only in understanding your sales funnel and learning which customers are lost where but also with our payment page solution. As it enables targeted offering of payment methods like Buy Now Pay Later services to customers, ensuring they have low fraud probability and most importantly high abandonment probability enabling you to maximise the revenue gains by large increases to your sales revenues whilst keeping costs and fraud extremely low.
We provide a similar service with payment methods like AMEX and Dinners Club however I will save that for another blog.