Buy Now Pay Later is helping retailers generate growth

With the high demand for credit card alternatives, the popularity of Buy Now Pay Later (BNPL) financing solutions has risen rapidly and continues to grow faster than most other credit products. Installment lending is now growing three times as fast as traditional credit cards and since 2018, POS lending products have seen 20% per year growth.

Today’s consumers, especially Millennials and Generation Z, have demonstrated a reluctance to use revolving debt such as credit cards for purchases. Instead, they are gravitating toward the transparency and safety of installment products that make purchases more accessible and the purchasing experience more convenient.

For retailers, BNPL is helping attract new customers, increasing the motivation to upgrade and is boosting loyalty with shoppers. According to Forrester, merchants who use POS financing can increase overall sales by 32%. There is great opportunity to drive higher AOV, increase retail revenue streams, boost profitability at the point of sale (POS) and generate long-term growth.

However, before rushing to add BNPL to the marketing toolbox, retailers need a strategic approach that successfully aligns their brand values, their customers’ needs and their overarching business objectives.

Retailers should seek solutions that offer a broad set of product capabilities, strategic support, high credit lines and approval rates, individualized marketing, open lines of credit to facilitate future purchases — on top of a seamless, branded merchant experience that drives loyalty.

With fixed equal monthly payments and low interest rates, BNPL has helped bridge the affordability gap and convert potential customers. Nearly one third of millennials say the availability of an installment plan has influenced their decision to make a purchase.

BNPL helps influence not only customers who may not have purchased otherwise but also new customers across a variety of channels who are seeking affordable financing solutions, specifically BNPL solutions.

The outcomes for retailers can include increased new customer acquisition, boosted conversion rates, increased sales and high short-term revenues. But retailers should ensure that the BNPL option they are considering is clear and transparent to the customer so they know what their monthly payment is going to be and when their balance will be paid off.

Paying over time via fixed equal installments has also proven to be a strong factor in motivating budget-conscious customers to select upgrades, purchase premium versions of items and expand the number of items in their purchase. This is one of the primary ways to support revenue growth.

Success is dependent on transparent pricing and the easy to understand terms, as well as adequate credit limits. Transparency lets customers see exactly how and when they are going to pay off a purchase and gives them the confidence to upgrade. Retailers should avoid BNPLs with hidden fees and “gotcha” charges. They should also avoid BNPLs with low credit lines, this makes it particularly challenging to increase AOV’s of products sold in medium-high price points.

Customers have come to expect superior digital experiences and frictionless methods of payment, with instant crediting. Meeting these expectations drives repeat behavior and customer loyalty.

Offering a dedicated installment virtual line of credit, without a new credit application or multiple loans, is an important BNPL feature that can drive such repeat behavior. According to Lendit, 56% of customers are more likely to return to a merchant if it offers POS financing.

Retailers should also pay attention to BNPL solutions that can be merchant branded to drive successful brand awareness and loyalty, both online and in-store.

When it comes to growth, retailers should be leery of providers that claim their BNPL solutions can drive astronomical net new customers. Some BNPL’s have upwards of 40,000 retailer partners which they put into a marketplace for affiliate marketing purposes under the auspices of cross-promotion to their millions of end-user customers. This is a highly untargeted approach that rarely delivers on its promise. A realistic approach is to rather focus helping merchants sell higher average order values with greater frequency.

Citizens Pay has partnered with several retailers including Apple, Microsoft, and BJ's warehouse clubs to develop highly customized products and user experiences that have helped shape the modern POS experience and have led the way in how brands can best achieve growth through strategically aligned BNPL lending products.

Citizens Pay is unique in the BNPL space in that it offers an open line of credit, versus a closed line of credit, that is exclusive to the merchant partner and cannot be used elsewhere. This means that as a customer pays down their installment loan they still have available credit to make repeat purchases. Combined with targeted marketing campaigns, this unique feature generates growth beyond what typical BNPL’s could deliver. Citizens Pay can offer more customers higher credit lines designed for simple repeat purchases, and with lower rates at reduced costs for retailers.

As a fintech within a nationally recognized bank with unmatched enterprise account expertise, Citizens Pay also leverages deep digital expertise and experience in consumer finance to offer a wide product set of configurable omni-channel that perform equally well online and in-store.

Businesses that have partnered with Citizens Pay are more successful in engaging their customers, building better long-term relationships, and creating a purchasing experience that drives positive sales results.

Visit Citizenspay.com to discover how Citizens Pay can help improve the customer experience and grow sales for your business.