How buy now, pay later beefs up the bottom line

It’s no secret that retailers are always looking for ways to improve their cash flow. Whether it’s chasing unpaid invoices, selling off old stock at a discount or simply improving overall sales, there are a whole bunch of ways to keep a business’s cash reserves healthy.

One increasingly common way for retailers to improve things is through offering buy now, pay later (BNPL) services. These allow consumers to spread the cost of a purchase over time – without having to pay interest.

The BNPL service fills the gap between the sale and the customer’s eventual payment, helping cash to flow smoothly into the retailer’s pockets. This is great news for the customer, since BNPL allows them to maintain a more comfortable cash flow – a benefit which is then passed on to the retailer through increased sales.

Research shows that more than half of consumers choose to delay certain important purchases because they can’t afford them. One report found 51 per cent of respondents delayed necessary dental work because they couldn’t afford it, and 35 per cent delayed purchasing children’s clothing, while 29 per cent delayed undergoing a medical procedure. As budget-savvy customers grow increasingly cautious about spending on big-ticket items or unexpected expenses, BNPL can help in that all-important decision phase.

By breaking down the payments into more manageable chunks, the customer is able to see how the payment will more easily fit into their budget. This flexibility works in the retailer’s favour, because it is able to make sales that might otherwise have been abandoned.

Responsibility is key

Before buying into BNPL, retailers should always read up on the checks and balances that various BNPL services require of their customers before signing on the dotted line. Customer eligibility checks are an essential way to maintain security, and any well-respected BNPL offering will include age limits, identification, residency checks and more.

It’s critical to fully understand the risks and benefits for the consumer, too. After all, you need to communicate this to your customers and proudly offer the BNPL option with confidence. Responsibility is key, so always make sure your business is choosing BNPL for the right reasons.

And what about risks to the retailer’s cash flow? Actually, it’s a common misconception that there are additional cash flow-related risks involved to the retailer when offering credit through BNPL services. In reality, the majority of BNPL services take the risk on themselves, meaning most of these concerns are unfounded.

Retailers receive full payment the very next day, meaning the BNPL service providers are the only ones at risk should the customer not settle their subsequent payments. This means that a retailer’s cash flow isn’t affected, and the sale is paid for like any other.

Finally, there’s no denying that BNPL services cost the retailer more than the average debit card transaction. However, when you factor in how many more sales you can achieve as a result, the new sales far outweigh the costs.

Bridging the online/offline divide

One major factor that can affect a retailer’s cash flow is the unpredictable nature of customers’ shift from online to offline. They might spend weeks, months or even years flitting between stores, trying different versions of the same product, or even purchasing items and then returning them.

Thankfully, most modern BNPL services have designed their systems with this exact style of customer journey top of mind. Bricks-and-mortar stores can be kitted out with web-based BNPL offerings, as customers open up their chosen provider’s app and scan an automatically generated barcode. Online, it’s even easier: only a few clicks stand between the consumer and their product, and the ease of use has shown to increase repeat purchases. And for the increasing number of omni-shoppers, their BNPL account travels with them, both online and offline, giving retailers data on their shopping habits and making shopping easier.

Some retailers assume that setting up a BNPL service in-store will be more hassle than it’s worth. This is yet another misconception, as integration with BNPL is actually as simple as turning on a switch.

By giving their customers the ability to pay straight away, retailers are able to inject a sense of freedom and flexibility into the purchasing journey. This, in turn, helps them maintain a healthy cash flow and regain a feeling of control over their business.

Libby Minogue is the chief revenue officer at Flexigroup, the pioneer of buy now, pay later in Australia, and the engine behind humm.


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