Buy now pay later: How brands can support consumers to leverage the payment option with confidence


This article is brought to you by Retail Technology Review: Buy now pay later: How brands can support consumers to leverage the payment option with confidence.

By George Ioannou, Managing Partner at Foolproof - Zensar’s product and service design arm.

Driven predominantly by the global pandemic, the Buy-Now Pay-Later (BNPL) scheme has become the fastest-growing online payment method in the UK, with online BNPL purchases growing by a rate of 39% per year and market share expected to double by 2023.

This is only set to continue in the current cost of living crisis with 14 percent of lower income consumers revealing they are planning to go into debt to afford their Christmas shopping, and a further ten percent of higher earners also planning to do the same.

There are undoubtedly associated risks behind the ‘no questions asked’ set-up that some schemes have adopted, reminiscent of the ‘payday loans’ trend we saw in the last financial crash. These risks can affect both parties. But if presented with thought and consideration, it can be a fantastic means of offering financial autonomy to customers.

Becoming aware of the potential downfalls of BNPL  

Aside from the obvious risk of customers taking on debt that they can’t afford to repay, there are further risks that the buyer should be guided on. For example, at what point charges become payable, what the consequences of missing payments are and what the impact on their credit profile  is, if payments are missed. 

What’s more, we’re now seeing BNPL enabled across other services, such as rent and travel. Growing accessibility is resulting in rapidly increasing usage, with many taking BNPL advertisements at face value and failing to research deeper into the potential risks before committing. In fact, more than two in five BNPL customers have borrowed money to meet their repayments, putting themselves at risk of falling into serious debt.

Unlike credit cards, BNPL is not (yet) regulated here in the UK, meaning consumer protections are minimal. With big players such as Barclaycard, Apple and Mastercard also stepping into this arena, the scheme is becoming more complicated as it grows due to each having their own ways of managing credit. 

However, change is coming with the positive step of  new government regulations being prepared - requiring lenders to ensure loans are more affordable and advertisements are not misleading - and traditional institutions entering the fray - meaning the promise of stability and legitimacy.  Responsibility for educating the consumer on these implicit risks should also not land with those that have their own BNLP schemes and those that connect to third-party credit lenders. 

Aside from the ethical implications, brands run a huge reputational risk should they be seen as failing to educate their consumers on the risks of BNPL, or worse, deliberately concealing the risks through misleading advertising. In fact, the FCA has recently expressed concerns over financial adverts seen on websites and social media, including posts by social media influencers, emphasising the benefits of BNPL products, yet failing to include “fair and prominent warnings of any risks to customers”. 

Building a positively responsible BNPL journey for the customer

It’s important retailers offering BNPL do so using a service that is aligned to the brand and customer experience people expect. Offering a BNPL or partnering with an existing provider acts as an extension of you as a business. Getting this wrong will damage brand perceptions and could alienate customers in the future. Here are three ideas on how ecommerce brands can make their BNPL scheme user centred:

  • Choosing the right BNPL provider to partner with.
    There are a huge number of BNPL providers out there at present, each with different terms, conditions and penalties. By thoroughly researching the market - and being selective on the number of schemes they offer to the consumer - brands can ensure they’re only associated with responsible providers offering consumers realistic terms.
  • Education, education, education.
    As it becomes easier for consumers to access BNPL schemes, it becomes more important for responsible brands to be their filter - allowing sound decision-making on whether they are borrowing for the right reasons.

    Develop helpful resources to safe-guard customers. This could be in the form of a downloadable document or pre-purchase questions directed at the consumer to establish whether the purchase is worth spreading the cost.

    By ensuring robust levels of education and messaging about BNPL schemes, brands can protect their reputation by being transparent and taking steps to protect customers on a financial level. After all, if education from your brand has prevented signing up for a bad BNPL experience from another brand, the customer trust will remain with you.
  • Presenting full transparency on product cost information.
    Lured by the ease of entering into a BNPL agreement, the short-term financing of smaller debts can often be unexpectedly hard to manage. A recent piece of research identified that almost a third of shoppers who use BNPL credit said repayments on the loans had become ‘unmanageable’.

    The wide range of payment options at checkout can be very confusing. Alleviate this by presenting full transactional transparency at the time of checkout, showing it as a credit product and not a payment option. Outlining clear terms so customers know exactly what they are going to pay over the life of the purchase will also help them make better decisions.

    From a trust-building perspective, being clear and straightforward about the different BNPL options and the true cost of the repayments (and the repercussions of missing one) can be a win-win for both the consumer and the retailer. 

Sharing the right information at the right time

Brands shouldn’t be solely relying on consumers’ existing - often lacking -  knowledge, or indeed the efforts of the government or the FCA to ensure people, particularly those that are financially vulnerable, are protected from the dangers of BNPL. 

With thought and adequate education, these products can offer financial autonomy to customers that need them. However, if poorly considered, the opposite could be on the horizon. Thankfully there are many easy-to-implement steps firms can take to ensure their consumers feel that they have timely helpful information in order to make informed decisions.

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