Buy Now Pay Later: Why retailers should ‘buy it’, not ‘build it’.
Buy Now Pay Later (BNPL) shows no signs of going away. Quite the opposite. Estimates put the size of the global BNPL market at $3.98 trillion by 2030, a growth of 45% per year, with consumers across Western Europe leading the charge.
The message to retailers is clear. Fail to get onboard the BNPL juggernaut, and risk losing market share.
Building is a bother…
But how? Retailers have a number of options. One is to build a BNPL solution in-house. This will suck up significant technical resources and time; time when customers are shifting their loyalties to retailers with a BNPL offer. What’s more, retailers are not payment experts, and BNPL is a challenging proposition. Not only are there the business partnerships to build with lenders, and the rails needed to move their money, but there are also complex requirements to adhere to. And with regulators in the U.K and Europe flexing their muscles to protect consumers from credit excess, keeping on top of evolving obligations is becoming a full-time job.
..but buying can be too.
Alternatively, a retailer may be tempted to work with a third-party BNPL provider, in the same way they do for other payment instruments. But this can negatively impact the customer experience. Many standalone BNPL solutions bounce shoppers from the retailer’s website to their own portal. Customers are suddenly faced with an unfamiliar name, and a site that looks and feels nothing like the retailer they are buying from. This is an oddity to consumers who are increasingly used to a seamless transaction.
Another challenge is coverage. Few BNPL providers operate in every market; and even if they do, they will be less well-known in some locations than others. Logically then, an optimised BNPL will mean a retailer working with multiple providers, to ensure coverage in every market. That creates its own challenges: managing multiple contracts and SLAs; siloed data that sits in each vendor’s system; or performing costly integrations to consolidate and compare insights.
Then there’s the regulatory climate. Some BNPL operators will be significantly disrupted by the new rules that are being ushered in. Inevitably, they will need to focus inwards to address these, leaving less time for their clients, and to innovate. Some may even shut up shop completely, leaving a big gap in a retailers’ go-to-market strategy.
The platform approach
Another option is to orchestrate everything you need through one BNPL platform. Increasingly this is how multinational and enterprise retailers eyeing scale are seizing the BNPL opportunity, leaving all the heavy lifting to the provider.
Coverage is one of the key benefits. With just one BNPL platform, a retailer can access multiple lenders and multiple finance options, be it BNPL or instalments. This enables scale to new markets quicker, and the ability to target customers and prospects with the most suitable finance options. In turn, this improves acceptance rates, and the capability to create omni-channel customer journeys.
Another benefit is having just one partner to deal with, and one system to integrate. That cuts down effort, costs and risk. With a single data source, duplication is avoided and analysis can be performed faster and with more confidence. Further control comes with the customer experience. With a white-label deployment model, the retailer retains their branding throughout the payment process, and so control of the end-to-end customer journey.
Fundamentally, this ‘buy it’ strategy shifts the burden for enabling BNPL payments from the retailer to the platform provider. In turn, retailers are able to focus on what they’re best at, while giving customers what they are increasingly looking for.