BNPL Solutions Are the Hottest Trend in eCommerce
Buy Now, Pay Later (“BNPL”) solutions are one of the hottest trends in eCommerce. Seemingly, every major retailer has a BNPL option at check-out. But are they getting the results they expected? Based on our clients’ feedback, we found that results varied significantly, depending on the BNPL solution chosen and how it was implemented. In this article, we will discuss the Top 10 Best Practices for Implementing a BNPL Solution.
There are two categories of BNPL products in the marketplace. Split payments enable consumers to typically pay for small-ticket items in four monthly installments over six weeks, with no interest and no impact on the consumer’s credit score. Installment loans, which are intended for consumers making purchases over $300, allow for payment across longer terms (six to 48 months) and may or may not charge interest, depending upon how the merchant funds the program. The market is rapidly evolving and some providers of split payments are now starting to also offer longer-term installment loans, and vice versa.
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According to internal Fiserv research, a significant number of online merchants offer BNPL solutions and many more are considering adding this payment solution. BNPL providers surveyed quote dramatic improvements in sales, reduced cart abandonment and increased average order value (AOV).
We talked to many merchants that recently adopted a BNPL solution to better understand their approach. Here are top 10 best practices merchants can employ to help ensure the optimal outcome from their implementation of a BNPL solution:
1. Implement the Right Solution: Split Payments or Installment Loans
Start with the consumer. Who is the target consumer and what problem are you trying to solve? Offering a split payment option (four payments over six weeks, for example) for a $2,000 purchase is not going to help many consumers. Analyze your orders and abandoned carts and determine which program is best suited for your customers.
Key design decisions include:
- Split payments or installment loans: If your average order value (AOV) is less than a few hundred dollars, then split payments probably makes sense. If you are trying to address larger purchases, installment loans may be right for you.
- Loan amounts and terms: Split payment providers typically offer consumers the option to pay in four installments over a six-week period. Installment loans can typically be customized. Offering a customer multiple options (e.g., $90/month over 12 months, $48/month over 24 months) will increase adoption.
- Interest rates: Clearly, consumers want 0% APR. As a merchant, you can determine how much you want to subsidize a loan. For example, you may want to offer 0% APR for all loans up to 12 months but only for certain categories or ticket sizes.
2. Inform Consumers Early in the Purchase Journey
The earlier in the purchase journey consumers become aware of BNPL payment options, the more likely they will use it. By the time consumers reach checkout, they typically have decided if the item fits their budget and whether they can afford to make the purchase.
BNPL information should be displayed in a number of places:
- Banner ads, as well as ads on Facebook, Twitter and other platforms should advertise BNPL for more expensive products.
- Home pages, product category pages, and other landing pages where products or deals are advertised can benefit by showing the product cost in terms of installments.
- Presenting the option to pay over time on product detail pages can be very effective. At this point in the consumer journey, the consumer is interested in knowing more about the product or knows that they want the product.
- At checkout, BNPL should be a payment option and the BNPL provider should provide a simple application process to maximize conversion.
3. Incorporate BNPL Into Seasonal Promotional Strategies
If you’re running a holiday promotion, for example, make it a point to mention the BNPL option in your collateral. When promoting a sale on social media, use hashtags like #Quadpay or #CitizensPay to increase the visibility of your posts.
4. Offer an Omnichannel Experience
BNPL is most effective when it’s part of an omnichannel consumer experience. Consider a solution that offers both online and in-store options to give consumers the most seamless experience possible. A few BNPL solutions allow the consumer to create a virtual card that can be inserted in an Apple Wallet or Google Wallet. If the merchant has NFC-enabled terminals, the consumer can simply tap to pay.
5. Evaluate Approval Rates
Retailers never like to be the bearer of bad news with customers during the shopping journey. That is why it’s important to choose a provider with high approval rates. If a provider only approves 40 percent of a merchant’s customers, that leaves 60 percent who will be upset when their purchase is rejected during the checkout process.
6. Consider Buy Now Pay Later Implementation Requirements
Consider a solution that requires simple integration and leverages existing tender types. For example, a solution that relies on existing payment rails will make it incredibly easy for the retailer to implement. Adding the solution to the retailer’s website should only require a few lines of code.
7. Educate Employees to Promote Installment Options
Train your staff on how BNPL works so they can explain installment payments to customers. Associates are a great resource for helping ensure customers are aware of this valuable payment option.
8. Use BNPL Countertop Signage and Decals
Signage is an effective way to inform customers about BNPL. Many BNPL providers offer outdoor window decals, fitting-room stickers, checkout-counter cards, shelf wobblers and postcards to include in customers’ shopping bags. By prominently displaying the option for installment payments up front, whether on online product description pages and banners or through in-store signage and POS decals, merchants can drive improved incremental sales. Most BNPL providers offer customized assets to support those efforts.
9. Go After Abandoned Carts
According to eMarketer, 72 percent of consumers cite an order being too expensive as a reason for cart abandonment. Most e-commerce platforms provide functionality to send targeted emails to consumers who abandon their carts. Send an email with installment options to the consumer to drive conversion.
10. List Your Store on BNPL Directories
As more consumers become familiar with BNPL, some shoppers are actively seeking out retailers who offer the payment solution in store. Raise your BNPL profile by listing your store on your provider’s shop directory. That could help drive new traffic to your site.
To learn more about implementing a Buy Now, Pay Later solution, schedule a free consultation with Fiserv today.
