Payright co-CEO Piers Redward talks payment schemes during COVID-19.
We have seen a significantly change in the broader retail landscape over the last several months, much of which has been accelerated by the COVID-19 crisis.
One outcome, amongst many, has been the increased adoption of Buy Now Pay Later.
This uptake, however differs from the impulse-driven buys of the pre-covid market.
In the latest Illion Economic Update released this month, figures show the adoption of Buy Now Pay Later (BNPL) as a payment method at an all-time high; higher than at peak Christmas trade levels, and up a staggering 22% on the same time last year.
So, what does this change in preferred payment types mean for retailers, and what’s next for the rapidly changing world of BNPL?
Who is using BNPL
It’s not just what customers are buying that’s shifted over the last few months, but also who.
While BNPL has been taken up at a higher rate, who is using these products may not be who you might think.
Illion notes “Interestingly, it’s the higher income earners who were the biggest adopters of BNPL, with a significant 63% increase in uptake of the payment method.”
BNPL’s traditional customer is also increasing their share of purchases using this method of payment; “Lower income earners maintained a steady threshold of BNPL, with an increase in uptake to 31% of November levels.”
From these numbers, it appears that there’s not just a willingness to take up BNPL as a payment method, but that it’s become an expectation across all market segments.
A price point shift
It’s not just the spread of demographics using BNPL that’s shifting, but also price points.
Previously the darling of eCommerce retail purchases sub $1000, the breadth of the BNPL product offering now means purchases are spanning across an growing list of luxury retailers also.
With an increased appetite for BNPL, businesses that had traditionally sold products outside the transaction limits of BNPL are now also offering customers the option to pay over time, and to great effect.
Luxury retail and high-end designer brands that previously seemed out of reach, now have payment options that mean retailers can offer their products to a new set of customers, or entice existing customers to increase their spend.
Ecommerce is the obvious winner of this shift.
Having already enjoyed the increase to the bottom line from the introduction of BNPL products in the last decade, online retailers are now seeing a shift to higher basket sizes and bigger purchases with the introduction of BNPL providers who specialise in the $1000+ space.
Online retailers with big-ticket items are able to offer savvy customers a more affordable way to pay for their purchases over time, and are seeing basket sizes increase as a result.
So, what next for BNPL in retail?
From recent numbers and retailer sentiment, it’s clear that BNPL is here to stay. In a market where consumers are keeping a closer eye on their cashflow, buy now pay later’s popularity and preference as a payment type will only grow.
This is good news for ecommerce retailers, and bricks and mortar businesses alike.
With BNPL products that reach past the $1k ceiling, BNPL is providing the means to grow conversion rates and ATV (average transaction value) across the board, all while providing a service that allows customers to budget more effectively.
Businesses that are looking for different ways to stimulate growth in a flat market are also turning to BNPL as a means to take their first cautious steps into trading again in a post-lockdown environment.
Payright provides buy-now, pay later flexible payment options.