The rise in popularity of Buy Now Pay Later (BNPL) showed no signs of subsiding during 2021, in fact … [+]
The rise in popularity of Buy Now Pay Later (BNPL) showed no signs of subsiding during 2021. New research suggests that in fact, this year, Christmas shoppers care more about alternative payment options than brand names.
GoCardless, a global fintech in account-to-account payments, recently published research that suggests 78% of US consumers “would shop with a lesser known brand if a wider range of payment options are offered”.
Supporting small businesses is also at the top of the wish list for many in the UK and US this festive season with 68% of US consumers saying they plan to “shop small,” according to GoCardless.
A particularly interesting finding from the study, and relevant for small businesses, is that many consumers are increasingly conscious of how they pay when they shop small.
“81% of US shoppers prefer to use peer-to-peer apps, such as Venmo or Paypal, over other forms of payments for small businesses. Of those, nearly four in ten (38%) choose this method because more money goes to the business, as opposed to when they pay with a card,” the research summarises.
If small businesses can get a range of payment options right and suited to their customers, then they will increase sales over the festive period. They will have the edge over businesses with more limited payment options and – crucially during this busy shopping period – online checkout will be much more seamless, avoiding the curse of the abandoned basket.
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The study finds that close to half (46%) of US shoppers say a complicated online checkout process deters them from shopping with a small business.
Buy Now Pay Later schemes are not without criticism – specifically that they encourage people to spend outside of their means. Small businesses will likely not want to be associated with that type of ethos, so researching their customer’s views on BNPL and peer-to-peer apps would be a wise move, as would reviewing the range on offer.
For example, Philip Belamant, founder of the BNPL company Zilch, and recently named Great British Entrepreneur of the Year 2021, would argue their offering would align with small business consumers. “Zilch is a buy now, pay later business that ‘always puts its customer first’. As the UK’s only fully regulated buy now, pay later provider, it never lends more than its customers can afford” he claims.
BNPL does provide some clear advantages for shoppers in comparison to traditional credit cards and unsurprisingly the giants in the field argue it’s a safe and sustainable way for customers to use credit. Klarna UK’s Alex Marsh explains, “BNPL enables consumers to spread the cost of a purchase with no interest and in the case of Klarna, no fees. This means that consumers only ever owe the original cost of the product.”
It also benefits consumers and small businesses alike – by making a product purchase through the BNPL option, customers get their products instantly and the small business receives full payment the very next day. Enabling a small business to maintain cash flow efficiently as their money is not stuck with customers even though they will pay later.
The are appealing benefits for small businesses pivoting to increased payment options, including BNPL if it is a fit for their customers and business values. Those that don’t diversify their payment methods risk being left out in the cold this Christmas.
