New customers, increased spend and more orders: Why retailers should build an effective BNPL strategy

“It’s very hard to walk even ten minutes in London without seeing some sort of advertisement somewhere about BNPL,” Worldpay’s director of enterprise product commercialisation, Reshmi Suresh, told an audience at last week’s Retail Technology Show 2022.

With a third of consumers not completing a purchase if they can’t use buy now, pay later (BNPL) solutions, Suresh believes that those who haven’t adopted BNPL should do soon – or consider a white label BNPL product instead, given the incoming regulation casting a shadow of uncertainty over the sector.

“This is the fastest growing payment method globally at the moment, and according to Juniper Research, this industry is projected to hit $1 trillion by 2026,” she said.

“We have 30% year-over-year growth, which is massive. It’s a huge industry, a huge opportunity and not one that anyone can really ignore.”

Suresh revealed that Worldpay’s recent global payments report showed that customer demand demand is already pretty high, with 71% of shoppers saying they are already using or are considering using BNPL.

“Around 30% of consumers won’t even complete the payment If BNPL is not available,” she said.

“This means it’s not an alternative payment, it’s really becoming the standard form of payment.”

Suresh went on to explain how BNPL can increase revenue for retailers.

“It is actually proven to increase revenue for merchants. And it does that in three ways.

“It brings in new customers who otherwise may not have made that purchase from you. Three-quarters of ‘Second Chance’ customers – those who don’t want to or may not be able to take on additional debt, such as younger shoppers – indicate that BNPL will let them make more purchases than they otherwise can.

“Secondly, it increases the order value. A study by Bain and Company said average order value goes up by 20 to 30%. So not only do you have more new customers, it actually increases the average order value they buy more from you.

“Finally, you see the frequency of purchases jump as well, by about 10 to 15% on average.”

With that in mind, Suresh has outlined five ways that retailers and brands can build an effective BNPL strategy.

Don’t just focus on ecommerce, omnichannel is still vitally important.

“All retailers want their customers to have a seamless experience across the board, not just online. And that’s true for payment methods as well,” Suresh told the audience.

“If customers are used to using the BNPL solutions online, chances are they will want to have that option in a physical store as well.”

BNPL giants Klarna and Clearpay have both recently introduced physical cards which can be used in-store.

Go beyond at checkout to free and post purchase options.

“At checkout, consumers add something to the cart, then they are ready to pay, there are lots of options and the BNPL is there, that’s all great. But at that point, your shoppers have already made a decision as to what they want to buy.

“But if you could give consumers the option of taking out finance and letting them know BNPL is available at an earlier stage, they are often more willing to buy additional things from you,” she added.

According to Worldpay’s latest payment report, 70% of customers are more likely to purchase online if they are told early on that their preferred method of payment is available for them to use. This can also lead to consumers purchasing bigger ticket items.

Have a clear indication whether BNPL is instore or online

“You have to have a clear indication whether something is available instore or online, even when people are just browsing,” she said.

“One of the things that I quite like when shopping online is below the price, a retailer displays what the payment breakdown looks like if you use a BNPL solution.”

Again, consumers are able to see at a glance how affordable the solution is for them – potentially leading to larger sales and more purchases.

Look after the consumer post-purchase

According to Suresh, key issues centre around looking at ways to capitalise on the 30% industry growth and the $1 trillion value of the BNPL sector.

“Post-purchase is a way a lot of issuers are now trying to come into the market,” she told the audience.

“If a consumer purchases something on their card, the issuer will then contact the customer and say, ‘Hey, would you like to convert this recent purchase that you made into a BNPL, or would you like to pay over time?’

Suresh points out that this is a nice way to engage the customer once they’re already made the decision to purchase an item and will help develop goodwill between a brand and the customer.

Have more than one BNPL option at checkout

Suresh also highlighted the importance of giving consumers more than one BNPL option at checkout.

“Many of these companies are trying to develop a unique identity,” she said.

“They have different strategies to acquire customers and build relationships with those customers, so it’s important that retailers look at what your customer’s preferred BNPL is. If there are two or three top ones, try to see how much choice you can give your customers.”

Suresh pointed out that 40% of shoppers drop their basket if they don’t have their preferred payment method available.

Consider a white label solution

“At WorldPay, we are a part of the broader FIS ecosystem (Fidelity National Information Services). We’ve got a whole banking solutions unit which focuses on issuer and lender relationships. One of the solutions we’re building at the moment is getting issuers to build white label solutions.”

Very simply, a white-label solution means that retailers can have a payment option on their website, which customers can use like any other BNPL  – but it won’t redirect the, anywhere else as it’s hosted on the ecommerce website.

“It’s basically connecting shoppers with lenders, so that we can offer a wide range of options to a wide wide range of people,” she explained.

Suresh pointed out the fact that white label BNPL’s have no single lender, so they can offer a wide range of options for the consumer.

“This means you can afford to match particular people with their particular credit rating. So if you’ve got somebody who has a very good credit rating, they can be matched with the appropriate lender and vice versa.”

“It can be configured and branded however you like, according to your company’s needs. For example, if you’ve got a strategic bank partner, store cards or anything else, you can bring those partners in as well,” she concluded.

With more than half of all UK consumers (54%) planning on using BNPL services in 2022 and almost as many (46%) believing BNPL is a smarter way to manage their personal finances, can retailers really afford not to offer the growing payment solution?

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