Buy Now…but don’t ignore Payment challenges Later!

We live in an instant economy. When we see something we want, we can usually get it within 24 hours. And with consumerism changing so rapidly, so too are payments.

But there’s one payment method that’s been picking up speed more notably than others. The world’s consumers are jumping on the buy-now-pay-later (BNPL) train. Everyone knows about, has considered using, or indeed has fully adopted a BNPL payment method. And only in January, Klarna made headlines launching its own physical card, extending its BNPL proposition for the ease of the consumer. However, as with anything new there are teething problems, particularly for merchants.

Credit approval declines

Most BNPL propositions are only suitable for consumers with the highest credit ratings. This effectively means that a lot of shoppers are ‘locked out’ from accessing BNPL services. In fact, credit approval decline rates for BNPL are high, with some cases being as high as 70 percent, depending on the demographic.

For merchants, this means a large portion of potential customers could have a bad payment experience and ultimately abandon their purchase. If they only offer one BNPL option as well, this can even further limit their sales opportunities. If merchants were to offer multiple BNPL options at checkouts, this could open new revenue streams as they could sell to even more consumers and increase the average ticket size.

It can be expensive

Merchants are, no wonder, feeling the pressure to offer BNPL solutions to customers to ensure they get the best checkout experience possible. But it comes at a cost – usually an extra 3-7% on top of normal credit card processing fees! And while it’s true that merchants get paid upfront, with the BNPL provider takes care of collecting money afterwards, merchant costs still need to be considered, particularly when profit margins are tight.

Another downside to having so many payment methods available is that each one needs to be fully integrated into a merchant’s checkout. This integration process is expensive, time consuming and a resource drain on employees who could be otherwise focused on business development projects. And of course, merchants also must sign a commercial agreement with each BNPL provider that they are offering.

It can be confusing

Some shoppers prefer one BNPL provider over all others. While there are some who prefer to use several different BNPL providers in parallel. When it comes to adding the different BNPL payments to a merchant’s checkout, it can make for a cluttered and confusing experience, which could lead to consumers abandoning their cart.

It's a good start

With all that said, there is no question that BNPL is a welcome addition to the payment mix, both for consumers and merchants. Shoppers get more choice, can manage their cashflow in the way that suits them, and merchants have access to new customers and larger purchases. While there is room for improvement as the market matures, working with the right payments providers can help make the most of this opportunity. By getting the right mix of BNPL providers for the market, merchants can successfully offer this growing payment method at checkout.