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More and more businesses are moving towards online platforms to expand their customer reach. However, one of the major concerns that businesses have is cart abandonment rate.
According to a report, the average cart abandonment rate in India is 51%, while global average e-commerce cart abandonment rate is 75%.
With higher cart abandonments, revenue loss is evident as businesses lose out on potential customers.
One of the major causes for customers abandoning the cart is not finding their preferred payment mode. In fact, limited payment methods are one of the top reasons.
When it comes to making a purchase, customers seek affordable and flexible modes of payment. Therefore, cardless EMIs and Buy Now Pay Later options are getting increasingly popular among customers.
They are emerging as an alternative to credit cards for meeting spending needs.
Credit card penetration, especially in tier-2 and tier-3 cities has been traditionally low as India has been a cash-driven economy. With digitalisation and the pandemic, although credit card usage has significantly grown in the last couple of years yet many don’t have access to them.
On the other hand, cardless EMIs and BNPL methods of payment allow customers to make credit-based purchases. This enhances affordability as more and more customers can make payments without paying the total upfront costs at once.
Moreover, these zero to low-cost payment instruments have flexible EMI amounts and durations of repayment for customers.
So, it is high time that businesses add these payment methods to acquire a larger customer base with lesser cart abandonments to avoid loss of revenue.
Cashfree Payments, which meets all the payments and banking requirements of your business via its payment gateway, offers about 120+ payment options. Moreover, we have the widest BNPL Suite in the market with 35+ flexible options. Additionally, provide customized solutions for businesses along with several advanced features.
But how do cardless EMIs and Pay Later options work? How do they empower your business and how can you enable them?
And most importantly, how are they different when in both cases, the customer opts to purchase first and make deferred payments?
Well, here we are to answer all your questions! Let’s get started!
What is Pay Later (Buy Now Pay Later)?
Pay Later is a new & trending form of payment that helps customers in availing instant credits. It is a brief term for ‘Buy Now Pay Later’ and as it is self-explanatory, it allows customers to pay later for a purchase they make now.
Pay Later primarily enables low-ticket transactions, for instance, up to ₹ 1,000 or sometimes ₹ 5,000. This helps attract Gen Z and youngsters who are not eligible for credit cards yet have the propensity to shop.
There are lending partners and buy now pay later apps that provide credit lines to the customers and customers have to pay them back in some time. Like a credit card, they have an interest-free period after which they are charged.
In case of late and missed payments, pay later apps can charge a late fee. They may waive late fees upon the customer’s request if s/he agrees to make payments within the next few hours. Customers can also request them to increase the repayment tenure depending on the terms and conditions of the lending partner.
Some providers also allow minimum due payment which customers can do to avoid late fees. Moreover, some lending partners allow customers to turn their repayment amounts into EMIs.
Businesses can partner with these lending providers and enable ‘Pay Later’ for their customers. For example, travel and destination management companies enable Pay Later options for customers where the latter can Travel Now but Pay Later.
Likewise, edtechs allow customers to purchase courses via Buy Now or rather Study Now Pay Later options.
What is Cardless EMI?
Cardless EMI is yet another raging payment method where customers can make a high-value purchase but pay for it in EMIs. Cardless EMI means that it is not associated with any card. The term ‘cardless’ suggests that the EMI is not linked to the customer’s debit or credit card (although one can choose to pay from cards).
Customers can pay EMIs without credit cards? Now how does this work?
Just like ‘Pay Later’, there are several third-party EMI partners who provide credit lines to customers. However, unlike BNPL, cardless EMIs offer higher credit limits to customers and thus businesses can have a higher average order value by enabling this payment option.
The credit providers ask for basic information from the customers like Aadhaar, PAN, income details, etc. to verify and judge their creditworthiness.
Accordingly, they approve the credits to the customer which they can use on various online platforms for payments.
The customer has to repay the lending partner within a defined time that they both agree upon before availing of the credit. Thus, customers get access to small-ticket loans and can repay them in small instalments, that is, cardless EMIs.
Most credit providers do not charge interest on EMIs but levy a fine if payments are missed or delayed.
Businesses can integrate with lending partners like KreditBee or ZestMoney to enable cashless and cardless EMIs for their customers.
However, the customer first needs to register and get an approved credit line. The customer can do this one-time/first-time while checking out and choosing cardless EMI payment options.
Comparatively, checkout via cardless EMIs is easier than the card-based ones because the customer needs not enter card details like 16-digit number, CVV, etc. This results in a faster and simpler shopping experience.
Usually, repayments of Pay Later payment methods are done in a lump sum within the interest-free time. But if it allows EMI repayments, it becomes a Cardless EMI payment method.
PRO TIP: Read about 0% EMI Payments with ZestMoney and Cashfree
What is the Difference Between Pay Later and Cardless EMI?
Both are credit products and are relatively new.
Well, to list down the similarities between Buy Now Pay Later (BNPL) and Cardless EMI payment options, they are –
- Both give instant access to credit
- In the case of both, third-party credit providers provide them to customers. They can approve or disapprove of a customer
- The process is usually paperless and digital for both of them
Now, let’s understand the minuscule differences between the two-
| Pay Later (BNPL) | Cardless EMI |
| For small ticket size credits | For higher credit limits |
| Targets youngsters and students who have purchasing power but are ineligible for credit cards | Aims to penetrate the tier-2&3 cities where customers get easy access to credit via the mobile app itself |
| Pay the whole credit amount in lumpsum after the credit period is over | Break the whole credit amount in EMIs and pay over the stipulated time |
| The lender may or may not allow repayment in EMIs | The repayment structure is in EMIs itself |
| EMIs may be chargeable. Some lenders offer zero-cost EMIs | Cardless EMIs are usually available at 0% interest barring a few exceptions |
Let’s explain with an example!
Suppose a customer makes a payment at an online store using Simpl, a Pay Later instrument. Once the bill is generated, the customer must make the entire payment by the due date. Whereas, with ZestMoney, the customer can opt to pay in EMIs over some time.
SIMILAR READ: Enjoy Higher Revenue With Cashfree Payments’s BNPL Suite
How can a Business Enable BNPL & Cardless EMI with Cashfree?
In the very beginning, we answered ‘WHY’ businesses NEED these new payment methods and credit instruments on their platform. Reiterating the fact, that different customers have different preferences when opting for payment methods.
Having numerous payment options that add to the affordability of customers and the flexibility of their payments only improves the chances of customers proceeding with the purchase and not abandoning the cart. Hence, it gives them a seamless checkout experience.
Now, when a multitude of Pay Later and Cardless EMI lenders are available, integrating with each of them one-on-one is a time-taking and tedious process.
Whereas, integrating once with Cashfree Payments opens the gate to all these payment methods for your business. We offer flexible payment options with both card and cardless EMIs as well as Pay Later options.
MOST IMPORTANTLY, we have a pre-approved customer base of 20 Million+ for whom we can provide one-click checkout for BNPL modes.
Moreover, we provide faster checkouts and enable EASY access to credit just with customers’ phone numbers. You can reach out to millions of customers who use pay later or cardless EMI payment methods and increase customer conversions by 30%.
Go live quickly with our customised payment gateway integrations and plug-ins!
