Have you ever reached the end of a sales pitch where the customer is engaged and loves what you have to offer, only to hit the snag of price or, more relevant to today’s topic, payment?

A customer might see the value in what you’re selling and be fine with the price, but still be unable to commit to spending that much money upfront in one go.

This is a significant obstacle for those selling higher-priced products or services.

Consider the experience of buying a car. How many cars do you think would be sold if every customer had to hand over £40k in a single payment to drive off in their new vehicle? Not very many! This is why car finance has become such a big industry in its own right.

Your price doesn’t have to be anywhere near as big as a car purchase to cause issues. If the price makes your customer stop and think carefully about spending this much in one go, then you have a problem to solve. Your role as the seller here is to remove any unnecessary friction and obstacles to allow the customer to buy.

Traditionally, businesses have solved this problem in two ways:

1.      Allow customers to pay by credit card. It may mean a slightly higher processing cost for the business, but it is mostly insignificant. It will allow the customer to delay payment for a period of time until they need to clear their credit card. The issue with this solution is not everyone has access to credit cards or feels comfortable paying them off over a longer period of time due to the high-interest rates.

2.      Set up a Direct Debit to allow the customer to pay in instalments. This is usually a great option for your customer but not so much for you. You have the cost and admin to set up and administer the DD scheme. You are creating a cash flow problem for yourself by not receiving money upfront. You also have the risk of a customer defaulting on payments midway through the agreement, causing you a credit control and cashflow headache.

B2C

If you are selling B2C, i.e. to individuals and not to businesses, then the BNPL landscape is wild. There are a huge number of providers that pop up, and some that disappear just as quickly. Klarna is one of the market leaders and a name that most have heard of.

Having so many providers means that you can choose one that offers terms that best match you and your customers. Most providers will have various products. Some will carry no interest for the customer but a charge for you. Some will charge interest to the customer. With some, you will be on the hook for the money if they default; with others, the 3rd party (Klarna, etc) will take responsibility.

You must understand the terms and who is responsible for what before you offer this.

It’s also important to note that some of these BNPL products may be “regulated” financial products, and you may need to register with the FCA, so make sure you understand your obligations here, too.

I am not recommending Klarna by mentioning them so often in this post. As one of the most prominent providers it is easier for you to relate to. Please do your own research carefully before picking a provider.