Buy Now Pay Later (BNPL): new ways to boost sales

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e-commerce payment

Buying without paying right away is possible! Like technology, sales methods are evolving and modernizing, especially to target a young audience looking for simplicity, flexibility and novelty. Whether it's deferred payment or instalment payment, the latest generation of payment methods are attracting a growing number of e-tailers and consumers. Here are some explanations.

The "Buy Now Pay Later", much more than an epiphenomenon

In order to offer their customers a seamless and fluid shopping experience (both online and in-store), retailers are seeking to take full advantage of the many benefits of unified commerce, especially its most emblematic payment methods, starting with "Buy Now Pay Later" and its two variants (instalment payment and deferred payment), which are becoming increasingly popular with consumers.

instalment and deferred payments, what are the differences?

In search of greater control over their personal finances, consumers are adopting new purchasing behaviors. At the top of the list of these new habits is "Buy Now Pay Later" (BNPL), which allows the buyer to enjoy a good or service immediately without putting their bank account in the red (and without resorting to consumer credit agencies and their sometimes prohibitive interest).

In concrete terms, this trend is reflected in two payment methods offered by e-merchants. On the one hand, instalment payment to pay his cart in several times. And on the other hand, the deferred payment to pay for your purchase at a later date.

Solutions that are naturally integrated into the customer journey

In addition to the advantages for consumers, these new payment methods allow retailers to create a smooth purchase journey (both online and in-store) and to fight against customer frustration, especially during key business events where budgets are severely tested (sales, Black Friday, end-of-year holidays, etc.).

Offered in white label, these solutions allow a strong personalization of the payment experience and of the purchase journey (for both BtoC and BtoB sales), and thus offer the possibility to improve the conversion rate and to boost sales without affecting the brand image.

Because the payment phase is critical in commerce, it is fundamental to offer a simple and fluid solution to the user. Poorly prepared, this step can indeed drive away up to 35% of consumers. In the best of all worlds, the customer should be able to enter his payment information without the slightest friction, and on the merchant's side, the scoring should be done, the answer obtained, and the payment validated instantly.

For a long time, vendors have been relatively reluctant to offer these payment methods to their customers because of the technical effort required to connect a third-party solution to their existing environment. But thanks to application programming interfaces (APIs), implementing such solutions is now greatly simplified and can be done in less than an hour!

What's more, interoperability and compatibility with existing tools is also guaranteed, whether it's communicating with CMS (content management systems for ecommerce such as WordPress or PrestaShop) or the merchant's payment service providers (PSP).

A growing market

In 2020, deferred or instalment payments accounted for $93 billion worldwide, and could reach $181 billion this year, according to Bloomberg Intelligence. The research firm Kaleido Intelligence expects this to reach $680 billion by 2025!

And while payment FinTechs are looking to position themselves directly on this fast-growing market, for the time being, traditional banks are more discreet, with the majority of incumbent players remaining on the sidelines for the time being, preferring to opt for white-label SaaS solutions to offer their customers.

What are the real risks of BNPL?

For consumers, the risk is to give in to overconsumption and impulse buying. The merchant and his payment service provider must therefore find the right balance between consumer protection and incentive to buy.

For merchants, however, the risk is on another level. If the full payment is not received immediately upon purchase, it is possible that the full amount will never be received. On this point, the instalment payment partner can usually cover the merchant, especially by helping him to fight fraud techniques effectively. An example of this is the fintech Pledg, which takes care of outstanding payments and manages the risk of fraud.

Between technology and regulation: a necessary evolution

European regulations are evolving to provide a better framework for these new payment facilities and to strengthen scoring. In France, discussions had already begun last year. The Chassaing report on overindebtedness, which will be submitted in October 2021, calls for better supervision of micro-credit and instalment payments, as BNPL is not covered by the regulations of the 2010 Lagarde law.

Especially since developments such as Request to Pay (RTP) or Instant Payment (IP) are imminent and will also turn the world of payments upside down to offer even more instantaneous payments.

Faced with these challenges, Pledg offers a purchase journey without unnecessary complexity while ensuring compliance with the latest French and European regulations. This allows us to offer ever more fluid, transparent and customizable payment experiences!

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