By Angus Burrell, SVP Retail, emerchantpay
emerchantpay’s 2021 New World, One Market research found that BNPL is here to stay, with more than a third (38%) of consumers saying that having the option to buy now and pay later encourages them to make a purchase.
BNPL, once considered a niche payment method, has today become a mainstream payment method in Britain. According to The Paypers, BNPL schemes are predicted to account for 10% of UK online spending by 2024. Similarly, emerchantpay’s research found that online spending is set to increase overall, with one in five UK shoppers being more inclined to shop less on the high street now versus before the pandemic. Demographically, more than a quarter (27%) of Gen X (41 – 56 years old) and Baby Boomers (57 – 75 years old) say they would shop less on the high street post-pandemic, in addition to 25% of The Silent Generation (75 – 95 years old). In total, this equates to a £74.6bn potential eCommerce revenue opportunity for retailers.
With BNPL being a relatively new trend, some retailers are playing catch up to implement it as a payment option. However, as shoppers of all ages turn to online shopping more frequently, it’s not too late to offer BNPL solutions. It’s expected that BNPL will continue to grow due to its convenience and accessibility, and it is vital to get on board. With this in mind, what are the added benefits of BNPL solutions for merchants?
The rise of BNPL
The COVID-19 pandemic created economic volatility at an unprecedented scale, causing a growing number of redundancies and furloughs across the nation. As financial uncertainty soared, BNPL offered a way to stagger payments, turning them into manageable instalments, some of which are interest-free. For those who struggled during the pandemic, BNPL created an opportunity to manage their cash flow.
This is because BNPL services provide more flexible, less costly ways to spread out, delay or finance a payment and enable consumers to purchase items they may otherwise not have been able to afford. Further, the whole payments experience is completely digitised. When customers decide to pay in instalments, or pay in 30 days, they will commonly go through a ‘soft credit check’ which does not impact their credit scores because they are not attached to a specific application for credit. Some BNPL providers also offer financing options, for which a full consumer credit check is required.
Its convenience has proven popular, with BNPL services growing at a rate of 39% a year. What’s more, its market share is also set to double by 2023. By then, 3% of global eCommerce spend will be through BNPL services, with 85% of consumers who have used this method saying that they will continue doing so in the future.
As such, here are the top reasons why merchants should leverage BNPL:
1. Higher online conversion rates
BNPL can significantly encourage consumers to buy more as it allows them to overcome
cash flow obstacles. It has offered consumers a chance to follow through with purchases more seamlessly and at lower risk than other lending solutions. In fact, a report from PYMNTS highlighted that merchants that offer BNPL could see cart abandonment rates decrease by nearly 40%. Being able to spread payments creates more value for consumers as this encourages loyalty to shop with brands that offer the services they prefer. From the merchant’s perspective, this has significant cash flow benefits as they get paid upfront and in full, regardless of the consumer’s payment plan, with the exact time frames being dependent on their agreement terms with their BNPL provider.
2. Bigger ticket size
Not only does BNPL help to convert sales, but it is also becoming more popular today as it gives consumers the ability to conduct purchases on big ticket items such as appliances, TV sets and more. By offering flexible payment upon purchase, it influences the way consumers make buying decisions. This has led to ten million Brits saying that they avoided buying from retailers that do not offer BNPL options at the checkout.
Research by Klarna also suggests that by offering point-of-sale financing, merchants will typically see a 68% higher average order value. Those that provide consumers with BNPL options will over time see ticket sizes grow organically and can even avoid resorting to discounts or promotions that would typically convert sales at a lower price.
3. Improved retention
BNPL allows retailers to access a bigger range of consumers who typically would not have shopped in their stores. This is simply because it offers the flexibility that other payment options do not. In doing so, merchants can give their consumers the freedom to spread out payment plans at the point of sale, whether online or at a brick-and-mortar store. As a result, this leads to a more flexible and seamless shopping experience and greater confidence in their purchases.
It can also help to boost sales by encouraging repeat customer behaviour and loyalty both in-store and online. Evidence of this can be seen in the research conducted by popular BNPL fintech Affirm. It found that offering BNPL can have a 20% increase in repeat purchase rate, as well as an overall improvement to a business’ online customer conversion rate. A positive purchase experience is key in ensuring customer retention. These experiences, therefore, almost guarantee that your customer will continue to make purchases in the future.
It is clear that the buy now, pay later industry has witnessed tremendously rapid growth over the past years. The advantages of instant credit, deferred payment arrangements, and low to zero credit cost have made BNPL very appealing. Merchants equipped with a payment provider that enables consumers’ preferred BNPL solutions are set to see higher conversion rates, customer loyalty and the ability to attract a wider customer base.