What does it mean for businesses as more BNPL solutions come up?
I read the following recently "CommBank's buy now, pay later service will allow eligible customers to make purchases between A$100 (US$77) and A$1000 (US$770) and repay the money in four interest-free fortnightly instalments."
https://www.theceomagazine.com/business/finance/buy-now-pay-later-cba/
With providers left, right and centre offering BNPL solutions for every need and industry.. what does this mean for us? Is it a good thing, a bad thing? Is there anything to watch out for?
Although my company is small we are still the largest online filter brand. The BNPL later option can actually be positive for a small company in the long run, and I am happy to discuss this further with you.
Revenue that is stretched out helps small business plan their budget. Receiving payments in installments assures the company that they will have income fortnightly until the product is fully paid off.
I believe that it is a very customer orientate step to take and the company in question could easily win the market share by offering this service. My target audience is homeowners and this category isn't always so affluent. Being able to facilitate purchases for lower-income properties helps boosts a company's awareness and audience reach.
Let me know if you have any questions, please.
Rick Hoskins, Founder of Filter King
Thanks for sharing this, @Rick Hoskins ! I'd love to hear more about your experience with BNPL, specially as a smal company. It'd be great to hear your thoughts on how you see different industries benefiting from it, examples of when you've seen it done well, and how it's helped your budget and cash flow! This sounds like a great article idea!
I'm Zach Reece and I’m the owner and Chief Operating Officer at Colony Roofers, a locally-owned and fully licensed roofing business from Atlanta, GA. I am also a Certified Public Accountant (CPA) and have previously been featured in Money.com and Business News Daily. Here are my thoughts on BNPL.
BNPL is useful for small businesses with low cash reserves. Many early-stage businesses understandably don’t have high cash reserves. They’re still perfecting their product, trying to standardize the production process, and probably only have a few employees working 10-hour workdays. BNPL deals are ideal for these small businesses as it allows them to acquire the resources they need to increase sales and become cash-flow positive.
The bad thing about BNPL is that it can trap small businesses in a cycle of debt. When you give people the option to defer payments, they can quickly rack up a lot of debt. “It’s not an issue today, I’ll deal with it tomorrow,” they’ll say. Until tomorrow comes, and suddenly multiple debt payments are due on the same day. As a result, BNPL is a nightmare for financially illiterate small business owners.
Thanks!
Thanks so much for pointing the cash-flow benefits and the debt trap, Zack @Colony Roofers ! What is your direct experiences with BNPL? How did you make it work for you? This is very much in line with what @Rick Hoskins mentioned has worked for his business! @Rick Hoskins , curious if you ever found yourself in a sticky situation regarding late payers and how you dealt with it?
'Buy now, pay later, or BNPL as it is often abbreviated, is only a good option if you are financially stable. Because of this, it may not be a viable strategy for smaller businesses if they cannot stay afloat without the customer paying at that time. However, it may not always be a bad idea. Of course it is better for those who can definitely afford it, but its main draw comes from customers liking the idea of not paying right away which is enticing and leads them to buy. This may be beneficial to some small businesses as, even though they won't be paid in full right away, they will have more customers that will close the gap.'
Ethan Taub, CEO, Loanry, Inc
Thanks for summing this up, Daniel! BNPL has definitely some pros and cons which are worth weighing down when going for that model. This ties very well with what @Rick Hoskins and @Colony Roofers mentioned above. @Yee Trinh , do you find subscriptions are a more "stable" type of BNPL for small businesses?
The following is from Ethan Taub: 'Though subscriptions can be useful in some cases, they are easy to be forgotten about by the purchaser. Paying in those small instalments at regular intervals sounds like a great offer but if payments are late for any reason then they could face massive consequences down the line. They should be able to pay when ready as long as they are given a deadline.'
SavvySME's Premium Business is a subscription based product.. which is essentially what BNPL solutions are. Being able to take up products/services immediately and allowing customers to pay across a period of time. As such, we haven't needed to use any BNPL solutions.
Ultimately, BNPL solutions profit off businesses who employ the solution by taking a percentage of sales transacted. I can only imagine the more BNPL solutions there are, the larger the competition and thus, the lower the commission percentages for businesses.
I can only see upside? Would be interested to hear from those well-versed in this space and businesses who employ these payment solutions.
Thanks @Yee Trinh . Do you think we'll start to see more and more BNPL solutions coming through in the next few years?
There are a fair few now, including options for various niches such as trades work. Good to see it pop up in the trades industry where unfavourable payment terms and late payments can be a huge hit on cashflow.
Eloah Paes Ramalho, Community Manager at SavvySME
Thanks for sharing this, @Rick Hoskins ! I'd love to hear more about your experience with BNPL, specially as a smal company. It'd be great to hear your thoughts on how you see different industries benefiting from it, examples of when you've seen it done well, and how it's helped your budget and cash flow! This sounds like a great article idea!