BNPL market is heading for the SMEs soon

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Buy Now Pay Later (BNPL) recently became the most notable fintech trend, growing steeply in both sizes and scale even during a period of uncertainty and disruption. The adoption of BNPL by large enterprises such as Target and Walmart has always made the headlines. However, the growth of BNPL in Small and Medium Enterprises (SMEs) should not be overlooked as consumers, especially the millennials, continue to embrace the pay later option at the point of purchase. SMEs represent approximately 90% of the businesses in the world; hence they can immensely gain from this adoption.

Providing BNPL as an option not just helps the vendor keep up with trends but also has numerous other benefits­—improving customer loyalty and increasing sales volume. An interesting insight from RBC Capital Markets shows that customers tend to spend more when a retailer provides an offer on the BNPL payment option. Furthermore, the research also found that the number of products bought in a single transaction where the vendor provides a pay later option is 30% to 50% higher than the retailers who do not provide this option.

One of the major benefits of BNPL that apply particularly to SMEs is that, unlike the traditional merchant-managed systems, BNPL providers offer cash from the purchases immediately to the retailers. This can really help startups and small businesses at a nascent stage that have limited cash flow. Another notable benefit is that less staff is required for processing payments at checkout as it only takes a few seconds for the customers to pay via the pay later option.

A recent survey of more than 300 SMEs in the US revealed that 28% of the respondents are already offering ‘pay later’ as a payment option. In another soaring market, India—where digital payments have largely benefitted SMEs—the BNPL adoption by the SMEs is yet to reach 50%. The shopping cart abandonment rates are as high as 70% globally. However, BNPL could reduce this significantly. Notably, if the shoppers are presented with a pay later option at checkout, instead of abandoning their carts, 20-30% of them will complete the purchase.

Growth also brings tremendous challenges, with stricter BNPL regulations being implemented in the UK, US, India, Australia and elsewhere. SMEs are the key to economic growth and account for more than 50% of the employees worldwide; hence it is essential that the regulators also consider these vendors before tightening the regulations.

BNPL has dominated the headlines worldwide in recent years, and this trend is likely to continue. Startups and retailers at all levels should consider adopting BNPL, given the increasing demand for this option from the consumers. Blindly following the trends of giant corporations might not always work for smaller businesses. However, in these uncertain and unstable times, split payment options might be the best opportunity for growth. It is certain that we will witness more SMEs harness the power of BNPL and turn it to their advantage.

To know more and gain a deeper understanding of the global BNPL market, click here.