The ‘buy now, pay later’ revolution has hit Latin America. Are you ready?

Buy now, pay later (BNPL) has made it easier for millions of people worldwide to buy goods and services by spreading the payment.

Already the preferred payment option for merchants and consumers in many parts of the world, BNPL is now revolutionizing point of sale and online payment in Latin America.

Here we explain what BNPL is and we illustrate how it can increase sales and provide access to millions of potential new customers in Latin and South America. We also look at how Cleo is providing the technology to make shopping by installments super-easy.

What is BNPL?

BNPL is a credit option offered at the point of sale or online checkout. It gives customers an opportunity to buy something immediately and then pay for it in installments, often with zero interest.

Merchants can offer BNPL at the checkout of a physical store or online. By harnessing new technology, they can easily integrate traditional point of sale options with online and BNPL options to offer a seamless ‘omnichannel’ payment experience for customers.

While BNPL options can vary, BNPL providers typically make money by charging merchants a small percentage. Customers are only charged for late payment although this is usually capped. The time period for installments is typically between three and 12 months, allowing customers to spread the payment over time.

Huge growth potential

With the impact of Covid-19 accelerating the trend towards online retailing, there has been an explosion in BNPL globally.

The growth in BNPL has been powered by advances in technology, such as machine learning and artificial intelligence, which enables companies to gain greater insights on customers. This, in turn, is changing how customers get approved and charged for credit.

In the United States, rapidly-growing fintechs have diverted $8 billion to $10 billion in annual revenues away from banks in the past 24 months, according to a report by McKinsey. The potential for growth of BNPL in particular is even greater in Latin America due to the fact a large proportion of people in the region are excluded from traditional banking and credit solutions. In Chile, for example, an estimated 70% of the population does not have a credit card. This represents a huge untapped market for businesses looking to reach more customers and provide more choice.

Better for merchants. Better for customers.

Ease of payment makes BNPL attractive to both merchants and customers. From the merchants’ perspective, there is a growing need to replace or upgrade outdated payment systems to avoid losing sales during the purchase process.  

Typically, carts get abandoned if the checkout process isn’t smooth enough or if the payment options are too restrictive. There are also issues over engaging customers, converting potential customers into sales and obtaining data on customer preferences.

Not wishing to be left out, banks and credit card companies are also investing in BNPL, often partnering fintechs to integrate BNPL technology into existing offerings to give customers more choice and a better experience.

Business benefits of BNPL include:

  • Higher value purchases – because the customer pays in instalments
  • Increased average order value – the amount of money a customer spends when making a purchase from your website
  • More orders and more customers
  • Better conversion rates
  • More chance of reaching people denied other forms of financing
  • Faster credit approval
  • Higher repeat purchase rate
  • Potential to source and analyse better data for personalized marketing

Joining the revolution

The BNPL market is growing quickly in Latin America, with many new companies offering different kinds of point-of-sale financing.

One of the frontrunners in this space is Cleo, the fast-growing digital payment and BNPL specialist. The company has operations in Chile and Brazil (through its sister company Lara), with plans to expand throughout the region.

Cleo was formed in 2016 to “make shopping with instalments available to everyone”. It is now on target to become the number one digital payment company in Latin America and a trusted BNPL partner, both locally and regionally.

The company has gained a leading edge in the market by tapping into the need for simple, cost-effective solutions easily accessible for merchants and consumers alike.

Cleo offers two BNPL options:

1. Zero Interest

This is perfect for merchants/partners that have a slightly higher margin on their product. The cost is slightly higher than the usual installment because the consumer pays no interest.

2. Installments

Here, the cost is divided between consumer and merchant/partner. It provides the opportunity for customers to spread their payment over one or three months. A six-month option is also planned.

Both options are designed to help merchants target a whole new category of consumer – the estimated 70% of the population that does not have a credit card.

Cleo estimates that by harnessing its new BNPL technology, merchants will be able to achieve an impressive 20% to 30% increase in conversion rate and a 15% to 75% increase in average sales.

Other benefits include:

  • The user experience is improved by offering multiple payment options.
  • Young people are attracted to this new payment method.
  • It maximizes your sales and builds customer loyalty.
  • Seamless refunds as no charges are made to your customers’ credit cards or accounts.

Buy now, pay later is changing the way merchants and consumers approach payment. It opens up new markets and makes payment easy for everyone.

Now is the time to get on board.

Contact Cleo today and let’s grow your business.