Consumers are tempted by payment options offering them varying degrees of convenience and flexibility. This year, they have more choices than ever as digital wallets, online cash applications, QR code payments, money transfers, and cryptocurrencies move into the mainstream. How can BNPL help?
One increasingly popular form of payment globally is Buy Now Pay Later (BNPL). This payment option allows consumers to pay for purchases over time instead of up front – and often without interest or fees. Not surprisingly, consumers like BNPL because they can immediately buy goods on terms that are more manageable for them financially.
Retailers are equally enthusiastic about BNPL. That’s because these point-of-sale loans can deliver a 20-30% conversion rate and lift average ticket sales by 30-50%. Furthermore, BNPL allows retailers to extend payment choice at checkout, making it easier for them to attract new customers and increase their bottom line.
Let’s look at some key considerations for retailers interested in BNPL services and examine some of the technology solutions available to help them facilitate that journey.
Provides Payment Optionality at Checkout
Retailers must be able to offer the flexible, alternative payment methods consumers want in order to maximize conversion at checkout – why?
Consumer cart abandonment is prevalent with an average rate of 69.82%. An inability to offer consumers the payment methods at checkout they demand can easily lead them to look elsewhere. Offering BNPL services to meet customers’ desire for flexible payment options is crucial for customers looking for more optionality at checkout.
BNPL services enable customers to purchase goods upfront and repay the cost in easier-to-manage installments. These benefits can increase customer satisfaction and loyalty, often translating into incremental sales, a higher frequency of purchases, and higher average purchase sizes.
Drives Customer Acquisition
BNPL is proving to be a boon for consumers, with the payment method recording 215% year-over-year growth in the first two months of 2021. Consumers are using it to place orders that are 18% larger, too. Indeed, Deloitte expects approximately 11% of all ecommerce purchases in Europe to be handled via BNPL by 2025.
For retailers, BNPL is all about incremental growth, allowing them to secure incremental sales and incremental consumers through the sheer convenience of being able to pay in installments.
Furthermore, BNPL enables retailers to more effectively target lucrative demographic segments such as Gen Z and Millennials. The percentage of Gen Z using BNPL in the United States, for example, grew 24% between 2020 and 2021; while Millennial use of BNPL has grown by 13%. Older consumers are beginning to see the attraction as Boomers and Gen X adoption of BNPL both grew by 10% between 2020 and 2021.
Facilitating the Deployment and Management of BNPL
However, the reality is that new payment methods such as BNPL present both an opportunity and a challenge for retailers. While it is an advantage to give customers choice in how they can pay for a product or service, it can be laborious to negotiate with multiple payment service providers and costly to accommodate their different APIs and functionalities. In fact, it can take many months of painstaking integration work to add a single payment type to an existing payment stack and to related checkout, fulfillment, and accounting systems. Then there’s the back-end work required to support updates and enhancements to a payment type across its lifecycle.
So, for all of its consumer appeal and potential financial advantages, many retailers are daunted by the complexities of implementing BNPL and unsure how to onboard, integrate, scale, and manage the service over the long term. This is where payment orchestration and a cloud-native payment orchestration platform (POP) can help.
Retailers are increasingly replacing their legacy payment infrastructures and systems with POPs. Why? Because POPs facilitate payment routing and processing between multiple payment providers and unify all the components of a transaction under a single control layer, enabling the end-to-end management and automation of payments processing. In other words, a POP allows retailers to streamline and manage all their payment methods, services, and transactions in one place while dispensing with the time-consuming and costly coding and integration work involved in onboarding and supporting different payment methods.
Another advantage of a POP is that it allows retailers to work with a variety of payment providers and thus avoid being locked into proprietary APIs or a single ecosystem. The result? More payment options at checkout, which helps optimize customer conversion and increase sales.
There are many great payment service providers and payment orchestration platforms on the market today. However, retailers need to carefully evaluate the pros and cons of each service and platform and ideally choose a POP that offers the advances of cloud computing and can easily onboard new payment methods.
With new forms of payments emerging almost daily, it’s important consumers have access to the payment options they want and demand. Increased options at checkout, such as BNPL benefits retailers and customers alike. The right payment orchestration platform can enable a retailer to get up and running with BNPL quickly and enjoy all of its advantages without the burden of managing yet another payment type.