During the pandemic, shoppers were forced to switch to shopping online, this had ripple effects on many aspects of how consumers interact with merchants. One of the more exciting shifts in consumer behaviour is the emergence and popularity of ‘Buy Now, Pay Later’(BNPL) solutions.
According to AltFi, the impact of the pandemic also caused a credit crunch, which meant 59% of UK consumers were compelled to used credit cards to survive. Many of these consumers also turned to BNLP providers to finance their purchases.
BNPL solutions allow consumers to make purchases now, and pay for them in the future without incurring interest charges. Typically, consumers pay an upfront payment towards their purchase, then pay off the remaining balance over a pre-determined number of instalments. Often, consumers prefer the BNPL payment plans over other types of loans, as they have no impact on their credit score as long as they pay their instalments on time.
What does BNPL mean to businesses, and how can they improve the performance of this service?
Small payments lead to big purchases
With a repayment plan consisting of smaller instalments, customers can budget more effectively. This results in an increased Average Order Value, reduced cart abandonment, and return visits to your store.
They offer your customers a frictionless shopping experience
Most consumer finance options require customers to apply for credit, which goes through several checks. BNPL solutions offer frictionless shopping as customers can open an account with a soft credit check which takes minutes.
Decreased cart abandonment
As payments are divided into smaller instalments, the overall cost seems more manageable. The result is a reduced cart abandonment rate for ecommerce stores, and more customers who are more receptive to upsells and add-ons.
A more seamless transition from in-store to online
According to Retail Touchpoints, the lines between online and in-store are blurring to the benefit of consumers, as 90% of retailers intend to offer ‘Buy Online and Pickup In-Store’ by the end of 2021. Many BNPL providers have been set up to support this new trend and help businesses grow.
Helping you target new types of consumers
Current market trends show that 70% of consumers are reluctant to pay with credit because they don’t know the difference between the hard and soft credit check they’re required to undergo, according to TSB. Offering a BNPL payment option helps your business educate these consumers, encouraging them to make more purchases.
Getting ready to accept BNPL
BNPL purchase options have now expanded beyond retail, with travel and entertainment verticals catching up. BNPL is all about owning the customer relationship, not just facilitating one-time transactions. Financial experts believe it will become the number one credit intermediary in the world and will make credit card companies irrelevant.
Now is the time for merchants to evaluate how this relatively new payment method can benefit their business, attracting new customers, increasing conversion rates, and improving lifetime value.
