Two thirds of UK retailers (69%) report improvements in at least one area of their business sales and performance metrics as a direct result of offering Buy Now Pay Later (BNPL) payment to customers. This was the finding of analysis by RFI Global, the only the only global data and insights company focusing exclusively on financial services.
Among the UK retailers offering BNPL payment, the most common benefit delivered was sales conversion, with 61% of BNPL-accepting retailers indicating that it had improved their access to new-to-business customers. This drove growth in revenue for more than half (52%) of- and profits for more than a third (37%) of BNPL-accepting retailers.
With more than 17 million UK consumers having used BNPL services, new customer acquisition improved for 59% of retailers and just under half (43%) said customers were making more frequent purchases.
Despite the clear benefits that BNPL delivers for retailers, more than half (63%) claim they are not interested in offering it as a payment method. The most common reason given is a lack of relevance.
Some retailers may be wary about the criticism of this soon to be regulated market with concerns that consumers can run into trouble if they miss their payment instalments, leading them onto a dangerous spiral of debt. The UK government announced last month that it will require BNPL providers to conduct credit checks on users of its services and register with the Financial Conduct Authority, but this may not take effect until 2024.
RFI’s research also shows that one in five UK retailers are concerned about exposing their business to credit risk; highlighting a lack of understanding about how BNPL works since the BNPL provider takes that risk, not the retailer.
According to Mark Schultz, Global Head of Business Payments at RFI Global, “Even though there’s a fee for retailers to offer BNPL as a payment option, most retailers report a clear improvement in sales and other performance metrics.
Our research shows that the lack of awareness among retailers of the benefits of BNPL is acting as a clear barrier to growth. Rectifying these misperceptions and educating non-accepting retailers will be key to accelerating the uptake of BNPL in the UK and globally.”
From reduced fees to streamlined onboarding and contract flexibility, retailers are receptive to a range of incentives to begin accepting BNPL. Yet among those retailers that are yet to accept BNPL, one third (37%) said that nothing would encourage them to begin accepting a BNPL service.
Retailers are increasingly moving towards offering multiple BNPL options to their customers. “This is good news for consumers who use BNPL to budget and manage their cashflow to avoid debt,” added Schultz. “Staying with a single provider helps them keep better track of their credit record.
Further, not being able to access their preferred payment service is one of the key reasons consumers cite as something that can drive them to an alternative retailer. With inflation creating the biggest cost of living crisis to hit UK consumers in decades, it is in the interest of retailers to provide payment choices. Those that do are more likely to increase repeat purchasing and their bottom line.”
RFI Global’s report ‘The Global State of BNPL: How banks and providers can champion customer interest’ released earlier this year also highlighted consumer attitudes towards and use of BNPL including:
- No interest, No Fee is the main driver – What appeals to British consumers most about BNPL is: no interest charges (41% compared to 33% globally), convenience (31% compared to 33% globally), improved cash flow management so that they can pay other expenses (22% compared to 28% globally) and helping them to budget (28% compared to 31% globally).
· Repeat use BNPL for bigger ticket items – although online retail dominates BNPL purchases, consumers are interested in using it for higher value items such as electrical goods, household appliances and furniture.
· Covering everyday expenses – Against a backdrop of soaring inflation,around a third of consumers in the UK have indicated they would use BNPL to pay for everyday expenses such as household bills (34%), groceries (29%) and petrol (27%).
· Frequent users willing to pay a fee for excellent experience – frequent users of BNPL are finding so much value in using it as a payment option that 47% of BNPL users in the UK say they would still use the provider if fees were attached to it.
- Consumers averse to debt – Consumers surveyed by RFI Global display a level of aversion to debt and do not want to buy things they cannot afford, even ranking this as one of the key reasons why they do not use BNPL. Rather than leading people towards a dangerous spiral of debt, BNPL is helping them to better manage cash flow by offering short-term interest-and fee-free products, thereby avoiding revolving credit card debt and bank charges.
About RFI Global
RFI Global is the only global data and insights company focusing exclusively on financial services. We provide actionable and evidence-based insights to clients ranging from Global and Regional Banks to FinTechs, Consultancies and Regulators in 48 markets, helping them move quickly and confidently from question to data-driven action. RFI Global equips leaders across the finance industry with local, regional and global insights that pinpoint trends and predict future consumer behaviour, sentiment and needs.
