The e-commerce sector experiences consistent growth annually. As more individuals transition to online shopping and user-friendly platforms like WooCommerce facilitate the creation of digital stores, an increasing number of aspiring entrepreneurs are realizing their small business ambitions. Nevertheless, this proliferation of online stores translates to a plethora of choices for consumers.
With intensifying competition, retailers must adopt innovative strategies to maintain a competitive edge. Each customer and sale now hold greater significance than ever before.
A tactic that proves advantageous for both businesses and their clientele is the provision of flexible payment alternatives, such as monthly installment plans or buy now, pay later options. These arrangements grant consumers credit, allowing them to defer upfront payments while immediately accessing their purchases. Essentially, it functions as a form of short-term financing.
Implementing such a solution is straightforward and low-risk for most WooCommerce stores. They still receive full payment for each transaction in their bank accounts within days, without the need to evaluate a customer’s creditworthiness or pursue late fees for missed payments. This approach enables stores to concentrate on their core competencies.
What is buy now, pay later?
Buy now, pay later (BNPL) refers to services that allow customers to make purchases and settle the full balance over several installments. Upon making a purchase, customers receive their items immediately, while merchants receive full payment upfront, deducting a small fee.
In 2023, approximately 50% of individuals under 44 utilized a BNPL option. These solutions facilitate more convenient purchases for consumers, particularly for higher-priced items, thereby potentially increasing average order values for online stores.
Merchants specializing in high-value products often attract more customers by incorporating buy now, pay later alternatives into their payment options.
The responsibility of underwriting customers, managing credit bureau interactions, and handling payment collection is typically undertaken by the buy now, pay later provider, allowing store owners to concentrate on their core business activities. Moreover, in the event of fraud-related disputes, BNPL lenders assume the associated risks and costs.
Buy now, pay later has emerged as a captivating and beneficial service, embraced by stores worldwide as part of their payment offerings, yielding notable success.
How WooCommerce stores can integrate buy now, pay later
A convenient and efficient method to integrate buy now, pay later functionality into your store is through WooPayments—a solution designed to simplify store management and enhance conversions by offering various payment methods while consolidating management tasks within the WooCommerce dashboard.
Most store owners can easily incorporate BNPL options into their site using an extension, presenting a practical approach. However, this entails registering for an account with the chosen provider and completing activation procedures upon approval.
Now, prominent buy now, pay later providers such as Affirm and Afterpay are seamlessly integrated into WooPayments, enabling merchants to swiftly incorporate these services into their store offerings.
Users of existing WooPayments solutions benefit from a streamlined approval process, eliminating the need for additional extension installations.
Reasons to incorporate buy now, pay later options into your online store
In line with the trend of customers utilizing diverse payment methods, including digital wallets and cryptocurrency, they are increasingly seeking innovative payment alternatives that offer greater flexibility. In 2021, buy now, pay later transactions accounted for 2.9% of global e-commerce, a figure projected to nearly double to 5% by 2025.
Here are five reasons why offering buy now, pay later is advantageous for merchants:
1. Increase conversion rates
In the book “Almost Alchemy,” marketing guru Dan Kennedy shared a case study where a client selling an item for $29.95 was advised to split the cost into two payments of $19.95. Despite the higher total price, the client sold twice as many units. Similar tests across various industries have consistently shown that offering flexible payment options leads to higher sales volume.
Furthermore, installment payment options aren’t limited to high-value items. For instance, if a customer intends to purchase six products totaling $138, providing the choice of paying upfront or in three $49 installments can reduce hesitation about the overall price. This approach has been substantiated by hard data, with Afterpay retailers reporting an average 22% increase in cart conversions.
2. Enhance your profit margins
As illustrated in the Kennedy example, individuals are willing to spend more on the same item for the convenience of a payment plan. This dynamic benefits both parties: buyers can acquire more of what they need without the burden of lump-sum payments, while also enjoying the predictability of a monthly budget. Consequently, offering flexible payment options allows you to safeguard your profit margins on products.
Consider an online business offering a course with three payment choices: a lump sum, four payments of $225, or ten payments of $99. Since implementing monthly payments, they have attracted 27% more customers. Remarkably, 90% of their customers opt for the ten-payment plan, even though it costs $100 more than the four-payment plan. This statistic highlights that the majority willingly pay a higher total amount to benefit from lower monthly payments for larger purchases.
Furthermore, estimates suggest that buy now, pay later initiatives can elevate conversion rates by up to 30% and increase average order values by as much as 50%. Additionally, a recent study indicates that Afterpay retailers witness an average 40% surge in order value, along with increased customer retention.
3. Provide buyers with greater flexibility
Even if customers ultimately opt for your lump-sum payment option or decide not to make a purchase, the availability of choices is highly valued. By offering diverse payment options, you convey your commitment to facilitating convenient purchases for your customers, meeting them at their preferred payment methods.
According to Neil Patel, 56% of customers anticipate encountering a range of payment options at the checkout page. Many customers specifically seek the option to pay in equal installments, a preference that becomes more pronounced during periods of economic uncertainty.
The goodwill generated by offering multiple payment choices extends beyond actual buyers and can positively impact your business. It can result in favorable word-of-mouth recommendations, improved reviews, and heightened customer loyalty, enhancing the overall reputation and success of your enterprise.
4. Reduce overhead and administrative expenses
Offering financing options independently can pose significant challenges, particularly in terms of administrative tasks and potential revenue loss if customers fail to complete their payments.
Administering monthly payment plans can result in various frustrating issues. For instance, managing credit card expirations before all payments are fulfilled may necessitate follow-up actions. Moreover, an increase in product returns could diminish revenue while consuming additional time per purchase. Attempting to collect late fees from customers can prove to be a daunting task with minimal success.
Dedicated buy now, pay later (BNPL) solutions like Afterpay and Affirm offer viable alternatives in such scenarios. Upon a customer’s purchase, merchants receive full transaction payment within days. These BNPL providers manage the loan servicing and assume associated risks, including chargebacks and fraud. The streamlined customer experience often fosters repeat transactions, contributing to sustained business growth.
5. Expand your customer base
Affirm and Afterpay both maintain directories where customers can discover reputable stores offering buy now, pay later (BNPL) plans. With millions of users each, these providers offer the potential to attract significant, high-value traffic to your store.
BNPL options hold particular appeal for younger demographics, including individuals with lower credit scores, no credit cards, or those seeking alternatives to making large purchases in a single payment. Afterpay’s network, for instance, boasts 20 million global customers, with 72% belonging to Generation Z or millennials (Afterpay Internal Demographics, Q1, 2023).
Retailers leveraging Afterpay observe that 30% of their Afterpay shoppers are new to their brand. Therefore, if you’re seeking to acquire fresh customers, incorporating BNPL into your website presents a promising opportunity.
Adding BNPL to Your WooCommerce Store
If you’re prepared to boost conversions and elevate average order values while offering a valuable resource to your customers, continue reading to discover how to integrate this functionality into your WooCommerce store.
Enabling BNPL through WooPayments
If you’re already utilizing WooPayments, incorporating buy now, pay later into your store is a simple process: just activate the feature within your WooPayments dashboard.
With the WooPayments BNPL integration, you can conveniently manage all orders and transactions within a unified dashboard, eliminating the need to switch between multiple programs. Moreover, there’s no requirement for additional processing fees or the installation of extra extensions, which could potentially complicate site management or diminish performance.
For those not currently using WooPayments, there’s no better opportunity to begin. By leveraging this service, not only can you access the discussed BNPL offerings, but you’ll also gain additional benefits, such as:
- Centralized transaction management.
- Support for contactless payments and seamless synchronization of order information and inventory updates between online and offline sales.
- Capability to accept payments in over 135 currencies.
- Integration with various tools for subscriptions, memberships, and more.
Integrating BNPL into WooCommerce Using an Extension
If you’re not using WooPayments, you’ll need to incorporate buy now, pay later functionality into your WooCommerce store by adding an extension. Begin by navigating to the extension library and conducting a search for “buy now, pay later”. Take your time to carefully evaluate each option and select the one that best suits your needs.
Next, proceed to Plugins → Add New in your WordPress dashboard, and click on the Upload Plugin button located at the top of the page.
Select the file you downloaded from the extension library and then click on “Install Now” followed by “Activate” to complete the installation process.
The specific setup procedure will vary depending on the extension you choose, but each extension typically provides comprehensive documentation to guide you through the process. In most instances, you’ll be required to register for a merchant account with the provider and await approval to receive an API key, enabling you to integrate the solution into your website.
Offer the payment options your customers require
Buy now, pay later solutions serve as a crucial link between stores and customers, offering mutual advantages. Platforms such as Affirm and Afterpay assist millions of customers in promptly acquiring essential items while alleviating financial pressure. Introducing a new payment method merely offers customers an additional avenue to fulfill their needs. Consequently, thousands of online stores have utilized these tools to attract more customers and enhance average order values.
Ready to begin with WooPayments? Download the extension today.
Interested in exploring other alternatives? Browse through all the buy now, pay later extensions available.
Common Queries (FAQs) Regarding Buy Now, Pay Later
Buy now, pay later (BNPL) providers manage customer approval and remit the full amount to merchants upfront, thereby minimizing any impact on payment flow. Additionally, they bear responsibility for addressing issues such as fraud, repayment defaults, and late fees. Consequently, the process poses minimal risk for merchants while offering significant growth opportunities.
A recent survey revealed that over 70% of businesses employing BNPL experience notable enhancements in conversion rates, average order values, and customer acquisitions.
For merchants utilizing WooPayments, access to BNPL solutions from Affirm and Afterpay is readily available. Simply activate them on your dashboard to begin using them immediately.
However, if you don’t use WooPayments, you’ll need to install an extension to incorporate buy now, pay later functionality into your WooCommerce store. Follow the registration and activation instructions provided by your chosen provider after installation.
Yes, the ability to offer BNPL solutions on your site is contingent upon merchant approval, and customers’ ability to use BNPL is subject to their own approval and limits. Each platform has maximum order values, and limitations based on factors such as geography, currency, payment history, and more.
Affirm enables customers to pay in four or fewer installments over an eight-week period using Pay in 4 for purchases up to $250 (interest-free, no soft credit check required). For orders ranging from $150 to $30,000, payments can be extended over a period of up to 36 months, offering both interest-free and interest-bearing options.
Affirm maintains a payment minimum of $50 and can be used for orders up to $30K, with a maximum loan amount of $17.5K.
Affirm boasts 31 million addressable users and is utilized by 235,000 businesses worldwide. With a 20% repeat purchase rate, it is available in the United States and Canada.
With Afterpay, you can offer your customers the option to pay in three or four installments, depending on their location, without the need for a credit check.
Afterpay imposes a maximum payment limit of $2,000 in Australia, New Zealand, the United States, and Canada. In the United Kingdom, the maximum payment limit is £1,000, while in Spain and France, it is €1,000.
Merchants can access Afterpay’s extensive user base of over 20 million global customers, approximately 73% of whom belong to Generation Z or millennials.
Additionally, retailers using Afterpay have noted an average 22% boost in cart conversion rates.
