Blog Images

Buy Now Pay Later (BNPL) has been a good sales strategy for years. But only the large corporations had the luxury to offer such deals to its customers.In 2012, BNPL servicing companies appeared and started offering this as a 3rd party service.This shared economic concept of BNPL has come a long way during the last 8 years. BNPL has helped all kinds of retailers, regardless of their size generate more sales through an interest-free payment plan. First, let's talk about how it boosts online sales, and then let's find out who to integrate these services into your business.

When it comes to the Australian landscape, Afterpay and ZipPay are the industry giants in BNPL later services. Beginning Boutique was one of the early adopters of this technology and according to them,

"We have seen an increase in basket size and buying frequency. Purchases have grown by a factor of seven from 2015 to 2017, and it is now our customers’ preferred payment method"

The above statement itself is convincing enough, but let's find out the border picture of these payment methods and why you should use them as a retailer.

They offer your customers a convincing payment plan.

Registering with Afterpay or ZipPay as a customer is a much faster process compared to other lending processes (credit card application). These two services have slight differences, but the concept is similar. If you take Afterpay, when you register as a customer, you get a credit value and whenever you buy from an Afterpay merchant, you have the option to own the product instantly and make repayments every fortnight ( up to 4 payment cycles) with no interest. Customers don't have to worry as much about managing their budget as they have 2 months to pay for the product. ZipPay allows you to decide your payment plan, it could be weekly or monthly.

These payment methods breach the gap between our needs and wants. Let's say we want to buy a new outfit but it's not a necessity at the moment. If we see an outfit we like at an Afterpay merchant store, chances are high that we buy it with a 2-month payment plan. Research shows that people tend to even hide some of their BNPL purchases from their partners out of guilt.

It also encourages customers to choose quality over quantity. BNPL offers financial flexibility, so the chances of abandoned carts are less as the customers don't have to wait until the next salary payment to buy what they want or need.

BNPL customer base is growing fast

According to a news article by CBN, in August 2020, In Australia, Afterpay and ZipPay have an active user base of ~5.8 million users combined. Meaning ¼ of the Australians with purchasing power are using BNPL actively. Chances are high that these users will look for Afterpay or ZipPay merchants whenever they purchase. If your target market is Millennials and generation Z, they are the early adopters of these payment methods.

According to an e-commerce financial report in 2019 by Australian Post, Australia Post found that 1.5 million user sessions were sent to both Paypal and Afterpay from the top 100 e-commerce websites in Australia during Feb-June 2019. After Pay have received 28% of that traffic. This number will only increase.

In the same year, the issue of new credit cards has dropped by 1.5 million, further highlighting the shift towards BNPL over traditional credit. From March to June 2020, 370,000 users have cancelled their credit cards.

According to a statement by Damian Kassabgj, Head of public policy, Afterpay, 87% of their revenue was generated through merchant fees. Dismissing the idea that BNPL services trap users into unrealistic payment plans.

Also, with the pandemic the use of these services has grown rapidly, highlighting the variability of this business model. From March to August 2020, the share price of Afterpay has increased from $8.00 to $95

All of the above signals are proving that BNPL is going to remain a popular payment method

They innovate your checkout experience

In 2019, Afterpay introduced Afterpay Express Check out. They have identified that there are approximately 18 steps for a customer to follow in a regular check out process to complete a purchase. So they came up with an express checkout, where the customers can make the payments on the product page or on the shopping cart, reducing the steps of a regular payment process by 75% making the process 2 times faster. This has increased cart checkouts by 2-3 times and has increased the customer experience.

According to stats by Afterpay, customers who started with Afterpay 3+ years ago are now purchasing more than 20 times a year.

It's no doubt that BNPL offers flexibility to customers and increases sales for their merchants by doing so. Now let’s find out how to integrate these payment modules in your business.

How does the process work?

You have to register as an Afterpay merchant and then you can accept both in-store and online payments via Afterpay. When a customer buys a product with Afterpay, you get paid by Afterpay. Settlement time (when you receive the funds) will be based on what you agreed upon at registration. Afterpay takes the credit risk, meaning you don't have to worry about it. Afterpay offers your customer a flexible 2 months payment plan where they can pay for a product in 4 equal payments (instalments). Afterpay customers get a lower credit limit at the beginning ($500-$1,500) but it will increase (up to $2,000) if they maintain their credit history.

What are the costs involved?

There is no registration fee or annual payments. You will be paying as you earn. For every transaction that happens through Afterpay there will be:

  1. A transaction fee of $0.3
  2. A commission fee of 3-7% per transaction. The latter will depend on the industry and the company size
How to integrate Afterpay to your online store.

Afterpay supports most eCommerce systems and you can find out if it supports yours here.

  1. Personal details
  2. ID verification
  3. Industry and the business type
  4. ABN number
  5. Sales channels (online/instore)
  6. Average order volume
  7. Annual sales volume and so on.

If you have all these details with you, you can start the registration right away.

Once you submit the information, a sales representative will contact you within 24 hours and will complete the registration process.

Once you are registered, your e-commerce service provider can do the technical integration, then you can start accepting payments via Afterpay.

How does the process work?

The ZipPay process is much similar to Afterpay. You have to register as a merchant and when a customer checks out using ZipPay (online or in-store), you get paid by ZipPay. They will manage the credit risk. Customers get to choose their payment plan and they offer more flexibility when it comes to repayments. There are a few advantages when it comes to ZipPay. Merchants get paid on a same day basis (4 pm AEST). If the customer has a Zip money account instead of ZipPay, their credit limit goes up to $3,000 meaning those customers have more purchasing power.

What are the costs involved?

Just like other BNPL services, they don't have a registration fee or an annual payment. Although it will cost you;

  1. A transaction fee of $0.15 per transaction.
  2. A commission rate of 2-4%
How to integrate Zippay to your online store.

Zippay supports 20 e-commerce platforms and 24 POS platforms, you can find them here.

The registration process takes a few minutes and you need to provide the following information:

  1. Personal details
  2. Australian Business Number (ABN)
  3. Total Annual Sales
  4. Website address
  5. E-commerce platform
  6. Main business address
  7. Business contact number.

Once you submit the request, a sales representative will contact you within 24 hours.

Once you are registered, your eCommerce service provider can do the technical integration and you can start accepting payments via ZipPay

Other side of the coin (cons)

There are a few disadvantages of BNPL services. Unlike credit cards, the credit limit these service providers offer is generally less. They charge a merchant fee up to 3-7%, where it costs only 1-1.5% for a merchant doing a credit card transaction. But when you factor in the potential sales boost that BNPL can provide, you can rationalise this merchant fee. In a credit card transaction, you have the option of passing the transaction cost to your customer but the merchant fee of BNPL can't be transferred. Many argue that the customers will fall behind their due dates and end up paying late fees. But the stats say otherwise (even during COVID 19). Afterpay says that its customer NPS score is 80+. Order cancellations and refunds get complicated when you have a third party involved. You have to make sure that you change your policies accordingly when using these services.

That's an overview on Afterpay and ZipPay. Now it’s action time. If you need a service provider to integrate these services to your e-commerce platform, Maytech can assist you.

How Maytech can help

We are an Australian based software development company that specialises in bespoke web and mobile application development, eCommerce solutions, process automation and staff augmentation. If you find this content relevant, we are sure that we can help you improve the way you do business. Contact us to find out how our technical expertise and 16 years of industry experience can deliver results for your business.

Let's talk to find out how we can support your digital transformation.

Reach out today for an obligation free conversations.