Joining Ecommpay in 2022 to scale the company’s robust and innovative products, Moshe is a global payments expert with extensive experience in FinTech across consumer and commercial banking and payments, for companies including Visa, Barclaycard and Accenture. His roles have spanned strategy, product, sales, business development, and customer engagement and management. An established thought leader within FinTech, Moshe has authored a number of papers, as well as spoken at numerous events around the world, promoting FinTech and payments innovation.
Buy Now Pay Later (BNPL) is now a well-established payment option offered by many e-commerce businesses. However, research has identified that around a third are not offering this payment option in any form.
With many FinTechs and banks withdrawing from the BNPL market in the past two years, retailers could be forgiven for thinking the solution is on its way out. However, they may be relieved to hear that taking control of BNPL within their own payment platform could allow them to continue offering this popular solution. It makes sense because it helps increase conversions by spreading customer payments to increase affordability.
From the 70s to the 2020s
Although the concept of buying now and paying later is nothing new – home shopping catalogues were very much a feature of the depressed 1970s economy – the rise of ecommerce allowed it to be reinvented for the digital age. The pandemic further bolstered its success, with online shopping increasing rapidly and consumers benefiting from the ability to spread costs during the ongoing post-pandemic economic challenges and cost of living crisis.
As interest rates remain high and salaries fail to rise to match inflation, BNPL can bring great benefits to both consumers and merchants when used responsibly. A recent survey we commissioned found that 94% of travel companies expect customers to use the method more frequently next year, while 78% of all retailers were similarly optimistic.
Convenience and flexibility are two key factors boosting the popularity of BNPL, leading consumers to buy items of higher value when compared with credit cards which typically have higher interest rates. Our consumer research suggests that more consumers would turn to BNPL (34.9%) than to credit products (25.8%) in the current economic climate. And 45.2% of retailers offering BNPL have seen turnover increase in the last year. However, this leaves almost half of retailers out of the BNPL race. What’s holding them back?
The regulation spectre
The majority of Buy Now, Pay Later companies have been around since the 2010s. In that time, a handful of companies have dominated the market. The BNPL model has also evolved, with niches carved out, partly due to regulatory changes and partly in response to economic instability. It’s regulatory scrutiny that is likely to see the sector evolve further in the coming years. It is also possible that regulatory focus is what is causing some merchants to hesitate in adding BNPL to their payments offerings. But in a competitive landscape this could be a mistake.
The conversion potential
The conversion potential of BNPL shouldn’t be ignored. Our recent research found that 33.2% of British shoppers would remove items from their baskets if BNPL was not offered at the point of payment.
For the merchant, the big question is what sort of BNPL will their payment provider be able to offer. The name that immediately springs to mind when talking about BNPL is, of course, Klarna – the market leader in the ‘own-brand’ sector. A fully licensed bank regulated by the Swedish Financial Services Authority, Klarna was one of the first BNPL companies and focused heavily on promoting its business to raise awareness, further accelerating its growth. Its early investment paid off and the brand is probably big enough to weather any regulatory or economic changes.
Losing customer control
However, the ‘own-brand’ BNPL providers also present a potential risk for merchants which could be another reason some haven’t yet added BNPL to their payment options. With significant investment made in building their brand, the BNPL brand could be bigger than the merchant’s. Some merchants may be concerned that customers will follow the BNPL provider, rather than their own brand.
An alternative is BNPL aggregators who will act as an intermediary between multiple BNPL providers to provide customers with a choice at the checkout. Through a single platform, merchants can access a panel of lenders which seamlessly integrates into their checkout – all a customer has to do is select BNPL as a payment method and after assessing their eligibility across multiple lenders, they will be presented with the best short-term financing options available to them.
By expanding beyond own-brand BNPL, merchants can increase acceptance rates, and therefore conversion rates without having to enter partnerships with multiple providers.
The conversion potential
The conversion potential of BNPL shouldn’t be ignored. Our recent research found that 33.2% of British shoppers would remove items from their baskets if BNPL was not offered at the point of payment.
For the merchant, the big question is what sort of BNPL will their payment provider be able to offer. The name that immediately springs to mind when talking about BNPL is, of course, Klarna – the market leader in the ‘own-brand’ sector. A fully licensed bank regulated by the Swedish Financial Services Authority, Klarna was one of the first BNPL companies and focused heavily on promoting its business to raise awareness, further accelerating its growth. Its early investment paid off and the brand is probably big enough to weather any regulatory or economic changes.
Losing customer control
However, the ‘own-brand’ BNPL providers also present a potential risk for merchants which could be another reason some haven’t yet added BNPL to their payment options. With significant investment made in building their brand, the BNPL brand could be bigger than the merchant’s. Some merchants may be concerned that customers will follow the BNPL provider, rather than their own brand.
An alternative is BNPL aggregators who will act as an intermediary between multiple BNPL providers to provide customers with a choice at the checkout. Through a single platform, merchants can access a panel of lenders which seamlessly integrates into their checkout – all a customer has to do is select BNPL as a payment method and after assessing their eligibility across multiple lenders, they will be presented with the best short-term financing options available to them.
By expanding beyond own-brand BNPL, merchants can increase acceptance rates, and therefore conversion rates without having to enter partnerships with multiple providers.