How BNPL is redefining the customer journey

The exponential growth in e-commerce and the impact of the pandemic is fuelling the rise of “buy now pay later” (BNPL), and it is expected to reach US$680 billion in transaction volume worldwide by 2025.

This adoption is being embraced by retailers as they look for new ways to stay relevant. With more customers looking for seamless and intuitive end-to-end experiences, BNPL is providing traditional brick-and-mortar retailers new ways to advertise and reach out to existing and potential customers.

Traditionally, BNPL firms have played a limited role in supporting retailers at the checkout. However, retailers can now gain greater influence over customers by implementing BNPL in new ways throughout the customer journey. In APAC, the use of BNPL is expected to double in 2024, and in Singapore alone, market share is expected to increase to 13% in 2024 from 3% in 2020.

For retailers, this means a shift in customer payment patterns. Rather than just supporting the growing preference for instalment payments, retailers can take the customer experience a step further by shifting the BNPL relationship from a purely transactional one to a collaborative effort. To do so, they would need to team up with the right BNPL partner, harness their all-in-one apps for shopping and managing finances, and create a more sustainable and sophisticated business model that appeals to customers.   

Advertising through partner platforms

With an increasing consumer uptake of BNPL services, retailers can leverage on partner platforms to advertise their products and offerings, in addition to traditional marketing methods.

Young shoppers in particular, are favouring this new way of paying – at least 40% of the much-desired millennial and Gen Z consumers said that they are most likely to use BNPL, as compared to only 28% of those aged 55 and above. This ever-growing audience on various BNPL platforms means a greater pool of potential customers for retailers, and strategic partnerships enable retailers to expand their customer base exponentially.

Generating a seamless and bespoke customer shopping experience

As the world goes digital, customers are increasingly expecting more personalised shopping experiences. Brick-and-mortar retail is now seen as an inconvenience, taking up too much time and energy to physically peruse products and move from one store to another. For retailers to build a competitive advantage and higher audience engagement, it is important for them to provide the digital, customised experiences that shoppers now look for.

According to PwC, 73% of consumers value customer experience as an important factor in purchasing decisions, and are willing to pay more for experiences that they value. Through the use of BNPL platforms, data collected from all points of the customer journey is made available to retailers. Examples of such data include customer interaction and preferences, items that were eventually purchased and when each repayment is made. This, when turned into actionable insights, can bring great value to personalising customer experiences. The omnichannel approach means that consumers receive a seamless and efficient experience, and personalised responses regardless of the point of interaction throughout the entire experience journey. Experiences and recommendations can be curated to suit each consumer’s spending habits and patterns, resulting in stronger customer engagement and a frictionless sales journey that translates to higher conversion rates.

BNPL platforms are also able to integrate with retailer systems to create a convenient and fuss-free payment system. Despite redirecting to a separate portal for actual payment, retailers are able to maintain a standardised point-of-sale interface by introducing and integrating BNPL checkout options on their own site. The smooth payment process also means that consumers are able to gain instant gratification when it comes to their spending – getting what they desire without the burden of an upfront payment, all with the benefit of a fast and easy checkout process.

Building flexibility and brand loyalty 

Seamless customer journeys and better conversion rates aside, the BNPL market has also shown to be effective when it comes to increasing loyalty and repeat purchases. While higher customer satisfaction from a better digital experience would boost brand loyalty, loyalty towards a certain BNPL platform could also help retailers engage repeat customers. Research by FIS found that 81% of consumers in Singapore would rather spend with a retailer they have a loyalty programme with over one which they are not a part of. For example, BNPL platforms such as Atome have their own loyalty programme that uses points. To the Singapore consumer, one of the best features to sign up for a loyalty programme is if they have non-expiring points as an incentive (63% ranked this as their top three).

With the choice to make payments in instalments over time, many BNPL users are able to budget purchases accordingly, and can spread out their expenditure over a longer period of time. A study by SingTel showed that 41% and 25% of customers often abandon items added to their shopping cart as they are not ready for purchase and because of high product cost respectively. However, the usage of a BNPL platform gives customers the flexibility to purchase bigger-ticket items since they do not need to make the upfront payment, allowing them to spend within their budget for that particular month. This reduces the rate of cart abandonment as consumers now have greater purchasing power. An additional advantage to paying by instalments also means that consumers are more receptive to add-ons or upselling, with the overall costs being more manageable. Consumers can also have the choice to purchase multiple items at the same time since expenditure is now spread out.

With the affordability and malleability that BNPL services provide, retailers can leverage  these advantages to help draw more consumers to their product while improving the customer journey simultaneously.