Australia is witnessing a growth in the use of Buy Now, Pay Later (BNPL) services, such as Afterpay, Zip Pay and Klarna. The Playhouse Group has increasingly been engaged for integrations of BNPL platforms over the past few years. As the name suggests, BNPL is precisely that. Customers can receive their goods without having to pay the full purchase amount upfront, but rather in future instalments. Usually, no interest or fees are paid so long as the instalment obligations are met.
The adoption of BNPL services is driven by their convenience and technological integration, a shift away from credit card usage particularly among younger consumers, and for smoothing out the impact of expenditure over time and assisting with household budgeting.
The Global Payments Report 2020 by FIS-Worldpay found that this growth is especially true online with the use of BNPL increasing from 3% of all eCommerce transactions in 2018 to 8% in 2019. It forecasts that by 2023 this will more than double. From 2019 to 2023, the report also predicts that the use of credit and debit cards online will contract from 46% to only 28% of the market.
This trend is consistent with the findings of the Roy Morgan Digital Payment Solutions Currency Report from September last year. Its research revealed 1.95 million Australians used BNPL in the 12 months up to the report’s release, an increase of nearly 600,000 year-on-year. The majority of these (55.9%) were aged 14-34 despite them only making up 18.1% of the over-14 population.
“The younger generation want this kind of simple and flexible payment solution that suits their financial situation without forcing them into one-sided credit agreements with unfair interest rates,” said Daniel Jensen, Vice President of Product at Klarna. “Being able to offer a consumer-friendly payment method that provides an easy, short-term, no-interest solution – without requiring a formal credit agreement with these customers – is great for your business.”
As we discussed in our recent blog post on the best checkout practices for your online store, allowing a variety of payment methods helps remove a barrier to purchase, and in the case of BNPL demonstrates that your business is keeping up with innovation.
By adding a BNPL option to your checkout, you will:
- Improve customer experience – especially true for younger consumers who have come to expect diverse payment methods and are shying away from credit purchases
- Increase conversion rate – by reducing cart abandonment rates due to price and also helping impulse purchases, increasing conversion rates by 20-30% according to Nick Molnar, Co-Founder & CEO of Afterpay
- Increase average order size – by spreading the cost over multiple instalments consumers tend to buy more products (68%) and spend more money (25%), according to Vendhq.
- Get paid upfront and in full – with the risk of receiving payment for the purchase from the customer falling on the BNPL service provider.
A Playhouse Group client recently stated to CEO Luke Goldsworthy, “Afterpay has been crucial to the recent success of growth and customer satisfaction. We are now looking at other options to increase the checkout options for our customers.”
Be aware that like most payment solutions, there is a processing fee charged by the service providers, typically as a percentage of the sale plus a transaction fee. We can help you research this to make an informed decision on the best way forward for your business.
BNPL is here to stay and is growing. At The Playhouse Group, we can help you integrate it into your website now.
Get in touch with our team and we can talk to you about this or any eCommerce questions you may have.