Should you offer Buy Now Pay Later?

When times are tight, it may be tempting to offer financing to entice customers to support your franchise, but is this really something you should be doing?

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Why offer financing?

Buy Now Pay Later is a form of financing that encourages consumers to make a purchase today and pay for it at a later point in time or on up to three specified future dates. In an ideal world, the consumer would save a small amount each month to ensure that when the loan is due, they can pay it off in full. When this happens, both the business and consumer benefit as the business receives the sum due and the customer doesn't have to shell out up front.

Unfortunately, as consumers are increasingly cash-strapped, they may opt for a finance package like this with no viable way of repaying it. This means that businesses do not get the money they are owed, and consumers find themselves under increased financial pressure as businesses pursue them for repayment.

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Buy Now Pay Later statistics

A survey by Lending Tree [1] revealed that Americans are increasingly using Buy Now Pay Later to fund their lifestyles, including to purchase everyday groceries. Yet with 41% of those surveyed admitting to making late repayments, businesses should carefully consider whether offering Buy Now Pay Later is worth the risk.

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Why people choose to Buy Now Pay Later

Americans are under increasing pressure to maintain their lifestyle amid a backdrop of high interest rates, persistent inflation, and now the threat of price rises due to tariffs. Their salaries are not rising in line with these costs, and financing might mean the difference between making a purchase or not.

Many choose Buy Now Pay Later deals because they are free of interest, as long as they make the payment(s) on time, but as the statistics show, repaying these deals is becoming increasingly challenging. An alternative would be to use a credit card to make the same purchases, but these charge interest from the point of purchase, rendering some purchases unaffordable.

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Buy Now Pay Later controversy

Even though Buy Now Pay Later offers consumers a lifeline when they need to make a purchase but don't immediately have the funds to do so, this type of financing is controversial, partly because the sector isn't subject to the same law enforcement controls as other financing options. As a result, customers who miss payments may be subjected to undue pressure and high fees.

With these factors in mind, we urge all franchisors to consider whether they should offer Buy Now Pay Later, how to implement such financing deals, and the information they should provide to customers about the implications of missing payments.

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Resources:

[1] https://www.lendingtree.com/personal/buy-now-pay-later-loan-statistics/