Shaping the shopper experience through BNPL
Online stores face an uphill battle to remain profitable because of this.
Put into perspective, recent data from the Baymard Institute – which aggregated information from 41 different studies on the issue of cart abandonment – shows that by the end of 2022, the problem had hit an average of 70% across the e-commerce market.
This means that 70% of customers on average abandon their intended purchases at the point of payment. And this is after the additional incentive to BNPL has been offered.
Promote good business and good lending practices
The struggle BNPL suppliers face now is to reach that middle ground that provides enough good incentives to keep customers interested, without resorting to irresponsible lending.
Reports show that flexible payments are offered by BNPL services do reduce the number of interruptions in the shopping cart. They can also encourage shoppers to increase the size of their purchases. Also, when e-commerce stores offer BNPL service at checkout, they can also expect an increase in their Average Order Values (AOV), which is one of the best ways to generate more revenue.
But how can these advantages be balanced out in terms of good lending practices?
Nooriala says regulation of the space will be the key to better services and a healthier result for customers. “The new regulations announced by the UK Government will better protect millions of consumers through the strengthened regulation of interest-free BNPL credit schemes and should be welcomed. They will help reduce financial harm to consumers and ensure that BNPL adverts are fair, clear and not misleading.”
However, he points out that the new regulations do not go far enough in protecting consumers from fraud as they do not require BNPL suppliers to implement technologies such as behavioral biometrics to reduce fraud and build digital trust. This is something Nooriala would like to see implemented in the UK, as it would be in line with regulatory measures being considered by the EU.
The future of BNPL in a depressed economy
Ultimately, the issues that have come to light recently are part of a natural maturation process for any new business or service: regulators assess the issues that arise and act accordingly – and BNPL is no exception.
But these services also apply to business payment services. Chris Tsai, CEO of Resolve, says that despite the downturn and tough new regulations in the pipeline, leading BNPL players are thriving. This is especially true for consumer players like Affirm, who know how to underwrite and grow in all market conditions.
“It may be tougher for others with less capability in a recessionary environment. But for B2B BNPL players, it’s even more exciting as so many B2B companies are ‘getting religious’ about how to modernize their business payments – net terms, accounts receivable and so on – for the digital age.”
B2B BNPL vs B2C BNPL Regulations
In terms of regulatory requirements, Tsai says distinguishing between B2B and B2C BNPL services is also important. “While B2C BNPL is being watched very closely by regulators and investors as a completely new approach to consumer lending, B2B BNPL should be more appropriately viewed as the digitization of business payments and practices that have occurred since the beginning of commerce.”
He points out that before BNPL it was not unusual for B2B companies to already use net terms for extended credit. “What we’re seeing now in the B2B BNPL space are technologies that allow a wider range of companies to embed these tools into their accounts receivable functions that ultimately increase their access to working capital and provide downstream workflow efficiencies.”
He adds, “B2B BNPL is absolutely booming as companies of all sizes learn about ways to improve their business operations through built-in financial tools.”
