When shoppers know they can buy what they want at a fraction of the total amount due at checkout, they may be more likely to make a purchase. After all, who wants to limit their shopping to payday when they can enjoy their new goodies immediately?
Delivering more customer service and flexibility is a no-brainer. And given the competitiveness of the retail and service landscapes, businesses need to explore every possible tactic to keep sales rolling in.
But here’s the problem: No small business wants to leave itself out of pocket. That’s where customer financing options comes in: Buy Now Pay Later (BNPL).
In this article, we’ll cover things you should know to offer financing to your customers — from the way it works to choosing the right third-party provider for your business.
Customer financing is when businesses allow customers to pay for their purchases in installments over time rather than the total amount upfront. For example, instead of paying $500 for a new couch when checking out, they may make five monthly payments of $100.
With customers having more businesses to choose from than ever before, they’ve grown to prioritize those that provide maximum flexibility and convenience. This means digital tactics like customer financing can help increase sales, drive customer loyalty, and improve conversion rates.
The first step is to choose between in-house customer financing or third-party financing providers.
In-house customer financing is when a business offers financing directly to its customers.
While you can save on potential fees that third-party financing providers may charge, businesses should expect more work alongside greater risk — if you don’t have the proper infrastructure verifying that customers are creditworthy, you risk drowning in outstanding payments.
Follow these steps to offer in-house customer financing:
Third-party financing providers offer e-commerce financing options for customers and collect payments on your behalf. They can be your current payment processor or fintech businesses like PayPal, Klarna, or Afterpay.
The best part about third-party financing providers? You, the business, will still receive the full payment when the customer makes the purchase.
With so many different third-party financing providers for your customers to choose from, make sure you evaluate your options using these tips:
When you offer payment plans to your customers, you can enjoy upsides, from additional revenue to an increase in average order value.
By offering flexible payments, you can reach customers who are in the market for what you sell but can’t currently afford your product, whether because they don’t own credit cards, have maxed out their credit line, or are budget conscious.
By helping them get over that immediate financial hump, you’ll be able to bring in more revenue and sales from those who would’ve otherwise passed on your product.
Many large businesses today offer financing to customers, so if you don’t have a BNPL program, you may be missing out.
The key to staying competitive with large competitors is researching their financing terms and seeing if you can offer a better deal.
Customer financing programs work particularly well with upselling tactics, where shoppers are more willing to make add-on purchases thanks to the unexpectedly lower upfront payment. They may also be more inclined to upgrade to pricier products that they can afford to pay for over time.
Ready to offer financing to customers? The key is integrating the payment option into all your sales channels — after all, you want to provide a consistent customer experience no matter where people shop.
Many providers have pre-built integrations that let you offer financing with just a few clicks.
If you're already on an e-commerce platform, check for existing integrations between your payment provider and commerce platform. Otherwise, you may need to implement a separate provider.
Here are some sales channels to get you started:
If you’re already using PayPal to receive payments and are looking to offer financing to customers, you can integrate PayPal's Buy Now Pay Later into your POS system and website checkout.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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