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Should you offer customers a pay in 4 option?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJun 20222 min read

Buy now, pay later (BNPL) is a term that we’ve all become accustomed to in recent years and one that hasn’t enjoyed the best reputation. While deferred payment schemes offer customers great flexibility and allow them access to products or services they might otherwise be unable to afford, the inflated interest rates and hidden fees have sullied their reputation.

If it’s properly managed, BNPL can be a welcome alternative for your customers and help your business scale organically, particularly online. Consumers are also more accustomed to BNPL than they were years ago, with everything from our mobile phone contracts to our cars now typically bought on finance.

Of all the BNPL options, being able to accept pay in 4 instalments (either monthly or quarterly) is the most common and practical. But while it might be an ideal option for many businesses, is it the right fit for you?

How does BNPL work?

The general idea behind BNPL is that it allows customers the opportunity to spread their payments over time. It’s an increasingly popular way to pay for purchases in instalments rather than all at once upon purchase.

Unlike buying something on finance, there is no interest payment involved. You’re simply asking them to split the payment. Thanks to modern solutions such as GoCardless, this is an option it’s now possible for even the smallest of businesses to set up with minimal hassle.

The third-party provider takes care of the logistical work for you. Before each payment is processed, they start by performing a credit check on the customer. The BNPL provider then pays your business in full for the product, with the provider acting as a financial mediator between you and the customer.

The customer then pays the provider in regular instalments. The pay in 4 option is the most popular, as it allows customers to spread the cost either over a few months by paying every month, or over a whole year by paying every 3 months.

Why your business should offer pay in 4

Expand your audience – By offering more forgiving pricing structures, you’re opening up your products or services to those who might otherwise not be able to afford them.

Repeat custom – If customers are pleased with the service they experience when paying in 4 instalments, they are more likely to come back or recommend your business to others.

Competition – With more retailers offering this payment method in the wake of the pandemic, you will find yourself on the back foot if you don’t provide this option when your competitors do.

No risk – You’re being paid the full amount by the third-party provider so, technically, there is no difference in the process.

However, with the third party in control of collecting payment, they typically charge a fee for the service. Whether or not you feel that fee is worth the convenience and the extra custom is up to you. However, with 55% of businesses now accepting BNPL options1, it’s something you’re probably going to want to consider sooner rather than later.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. It’s a solution that integrates perfectly with BNPL providers and is ideally suited to 4 instalment payments as it allows businesses to collect payments directly from customer bank accounts, this way saving time and money.