Started a limited company in the UK and now it’s time to see what new things you could implement in your company. Businesses are coming up with new and innovative ways to run. For many people, the normal business operation is the buy now pay later method. This is done by the use of credit cards or cash.
With the many business needs changing, the payment methods have also changed. A good example that is quickly catching up with businesses is the buy now pay later method. This type of transaction or payment method is quickly catching up within the business community.
How does buy now pay later (BNPL) work?
In the normal purchase of goods, a customer is required the full amount for the goods purchased. In other methods, the customer will pay in installments but will not have ownership of the goods until he or she is done with the payments complexly. With the buy now, pay later method payments are done differently. A customer can pay for goods or services get them and pay for them over a period. Most customers prefer the buy now pay later business model.
Most of the buy now pay later business models used are usually interest-free. When a customer buys a good or service, they get to retain it. No interest charges are paid. The customer agrees with the owner of the business on the installments of payment he or she will do. The buy now pay later mode is easy and flexible. How then do businesses benefit from the buy now pay later model?
When the customers opt for the buy now pay later model, they agree with the business owners on the duration they will take to pay for the good or service. Since the customer will pay no interest, the businessperson has to come up with a way of making money. Business owners charge a small fee for every transaction or payment the customer will make. In the end, the customer who uses the buy now pay later model will end up paying more money than the customer who uses the buy now pay later option.
Advantages of buy now pay later
You get more customers
The buy now pay later model is good for business. With the buy now pay later option, businesses tend to get more customers. This is because more people are inclined to choose the buy now pay later option than the buy now pay now option. Customers might be willing to purchase goods or services but because of some financial strains, they might not be able to. With the normal model of buy now pay now, it might be a challenge to get the service or good since the customer does not have the funds right there.
With the buy now pay later option or model, customers can purchase as many goods and services as they want. This is because they can buy a good or service and pay for it in installments. The buy now pay later method attracts more customers. It is because many have purchasing power with this method of business. If a business adapts the buy now pay later method, more people will want to buy from the business. It will make the business get more customers.
The customers will be happier
Customers are happy when they have control over how they purchase their goods or services. The buy now pay later offers just this. Customers can select and buy a lot of goods and services. Customers have an option to purchase as many goods and services provided they have a payment plan and they pay for the goods and services. If a customer gets what he or she wants, he will be happier.
Having the buy now pay later model in your business can also help you as a business owner to empower your customers. The different payment options and installments available to the customers will make the customers aware of other financial methods of transacting money.
Customer loyalty
Businesses retain customers when the customers are served well and satisfied. When a business adapts to the buy now pay later method of business, it will retain its customers and the customers will be loyal to the business.
A customer feels appreciated and valued when a business gives him or her different payment options. A customer can take a good or service from a business and pay later. This will make the customer feel the business trusts and values him or her. The customer will in return be loyal to the business. The loyalty the customer has to the business will help him or her to pay back the money within the agreed time.
Increased sales and revenue
For a business to thrive and grow, it has to have sales and increase its revenue. With the old method of buy now pay now, some businesses were losing revenue and sales. This is because a customer might see a good or service that he or she might like but does not have the cash there. This will mean that the customer will have to postpone getting the good or service because he or she does not have the funds. This in turn will reduce the sales and revenue the business will get.
With the buy now pay later method; businesses are increasing their sales and eventually revenue. Businesses are getting more profits with the buy now pay later method. Take for example a business that has a website. If a customer wants to buy some goods, with the buy now pay later method, it will be easy for the customer to buy many goods.
With every type of payment, you will find some disadvantages. What then are the disadvantages of the buy now pay later model?
Disadvantages of buying now pay later
Difficulty in tracking payments
This is a huge disadvantage when it comes to the buy now pay later method. A customer might want to purchase some goods or services from a business or shop. For the buy now, pay later method payments are not made before the purchase. A customer might agree with the business owner on the installments of the payments. As much as the customer might leave his or her details with the company or business, it is not a guarantee that the customer will make timely payments. The payments made will also be hard to track because there might be many customers making it hard for businesses to track all the payments made.
When goods are returned, payments continue
This is a disadvantage to the consumer or customer. A customer might see something he or she likes and might want to purchase it. Since the option is to buy now and pay later, the customer opts to buy the goods. Once bought, the customer signs an agreement with the company with different payment timelines. When the customer takes the goods home, he or she realizes that they are faulty and decides to return them to the company or business. If there was no refund policy, the goods will not be refunded. Since the customer had used the buy now pay later method, he or she will be required to finish the payment of the goods taken. This will lead to a loss on the customer’s side since the customer will lose both his or her money and the returned goods.
Late payments
Late payments are bound to happen. When signing up for the buy now pay later option, a customer is made aware of the payment requirements. The customer and business agree on the terms of payment for the goods or services that are given. Sometimes the customer may make late payments due to circumstances best known to him or her. When this happens, the business is in danger because of the late payments. For the customer, a late payment will lead to a bad credit score. If a business or company sees that one of its customers has a habit of paying, the installments agreed upon late, it would not be willing to offer any goods or services to the customer.
Setup Challenges
Businesses and companies might want to use the buy now pay later mode. The companies will need to set up their systems. The companies will need some special technology to be able to offer the buy now pay later method. This will make the company or business incur many costs trying to set up the tools.
Customer debt
The buy now pay later method can encourage customer debt. With the buy now pay later method; customers can buy as many things as they want. This hence encourages a spending culture. Customers will buy many things knowing they will later pay for them. Sometimes because of unforeseen circumstances, a customer is unable to pay for the goods he or she bought. This will lead to the customer having debt that needs to be paid.
Sometimes customers will buy goods and services from different stores or businesses that offer the buy now pay later option. If the amount to be paid to the different businesses is a lot, the customer might get into debt because he or she might not be able to pay for the expenses.
Offers from different providers
As a business owner, you need to decide which provider of the buy now pay later option you will choose. The providers will help your business set up the tools and technologies needed to run a successful buy now pay later business.
When choosing a buy now pay later business provider, choose one that is within your budget. A business person should also conduct market research to know the best providers available in their city. Some of the providers can include:
These are one of the best buy now pay later providers right now. A business owner should reach out to them and get packages that can be used in the buy now pay later model business.
For business people, before choosing the buy now pay later method, do your market research. This will help you to identify if your business is the right one for the buy now pay later model. Knowing the advantages and disadvantages of the buy now pay later business model will also help you to know if that is the path you want to take or not.
The buy now pay later method of business is good if well done. Your business will grow, you will retain the customers, and gain even more customers.
Wanting to start your own limited company in the UK then head to Seed Formations for more information.