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Research Reveals the Impact and Future of Buy Now, Pay Later Services

December 20, 2018 Business News No Comments Email Email

Following the explosion of Buy Now, Pay Later (BNPL) services in 2015, its popularity amongst consumers and online retailers has not wavered.http://www.germany.travel/en/index.html In addition, the recently concluded Royal Commission, and ASIC’s report on BNPL, shows that this rapidly growing industry will continue to be an ongoing focus area to watch.

Power Retail, the number one resource for Australian online industry insights, content and news, has launched their “Spotlight Series”, with deep-dive monthly reports on leading-edge trends that will empower e-commerce industry professionals to make informed decisions.

Their first report, titled ‘Buy Now, Pay Later – Fad or Future?’ has been released this week. The nationwide research initiative, which surveyed over 5,000+ retailers and consumers, pinpoints the pressing issues around BNPL options and identifies how important it is to consumers; where the industry is headed and how retailers can leverage this to achieve growth.

Managing Director of Power Retail, Grant Arnott says, “BNPL is a serious trend to take notice of right now. In a few years’ time it will no longer be an alternate payment option and will be simply expected by consumers. Also, due to the recent Royal Banking Commission, some consumers have lost trust in the banks and will therefore start trusting a new generation of financial services.

“Alongside this, with the growing impact of Amazon Australia, competition in the Australian e-commerce sector has never been so fierce, and thus, success will come to those who adapt.”

Key findings from the BNPL research: 

  • BNPL has reached a critical mass in the Australian online shopper market with in excess of 1.8 million users, and a growth rate of over 120% per annum.
  • The most common BNPL transactions are conducted weekly, and most purchases are between $100 and $249.
  • The growth in BNPL has been dramatic. From 50,000 transactions per month in April 2016, to 1.9 million transactions in June 2018.
    Both shoppers and retailers agree that those consumers who use BNPL tend to spend more, buy more itemsshop more frequently and are more loyal to retailers who provide it.
  • The majority of retailers who took on BNPL felt that it had helped conversions and increased profitsOver half felt these effects immediately.
  • Once tried, BNPL soon becomes ingrained in regular online shopping behaviour, with 67% of BNPL customers still using the service 12 months on from their initial trial.
  • Millennials are currently the primary BNPL segment, but BNPL usage is rapidly expanding to other market segments.

Key recommendations and considerations:

  • BNPL is too big to be ignored. All online retailers should consider having a plan either to embrace it, or to help their customers to understand why they don’t offer it.
  • Retailers should consider promoting ease of trial to first time BNPL users. Established users will probably react more strongly to messages that focus on how it gives more flexibility when making large purchases, in particular for luxury items and gifts.
  • Retailers should consider how to leverage BNPL’s high level of emotional engagement and its significance in social media discussions between consumers.

As a key component of this research, Power Retail also conducted in-depth interviews with pureplay and multichannel retailers. They shared their thoughts on BNPL and its effect on their customers’ shopping habits:

CEO and Founder of Showpo, Jane Lu says, “Most of our customers don’t have credit cards so this is a great way for them to manage their cashflow.”

CEO of SHHHSILK, Olivia Carr says, “We took BNPL on to offer payment flexibility to our customers, to increase basket size and also as a new traffic source.”

Co-Founder of Costumes.com.au, Nathan Huppatz says, “Buy Now, Pay Later is quickly becoming a defacto payment method that sites need to offer.”

Grant Arnott concludes, “This research not only provides online retailers with actionable insights and strategies on BNPL methods, but it provides critical insights into how the market is transforming.”

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