Maximising checkouts: A new era for BNPL

Mike Dawson, CEO of Deko, shares his thoughts with Business Leader about the evolution of buy-now-pay-later products and how it is changing the retail sector.

It’s no exaggeration to say that the retail industry has undergone a metamorphosis during the pandemic, migrating from in-store to online in a move that will be for the most part irreversible.

This shift to e-commerce was of course already underway, but changing consumer behaviours due to lockdowns and a revolution in retail finance – how consumers pay – have provided the jet fuel for this change.

Yet, amidst all of these shifting retail habits, and the wide range of vendors providing some form of buy now pay later (BNPL) offering, one of the main challenges for merchants is selecting and integrating the providers for their business. Platforms that offer multi-lender, multi-product retail finance options are now coming to the fore.

The rise of cart abandonment

In the UK, 41% of consumers have abandoned a transaction during the online checkout process, while 24% have walked away from a purchase in physical stores. The limited range of payment solutions on offer can be a factor in this decision – research shows that close to 10 million Britons have chosen not to buy from merchants that don’t offer alternative payment methods at checkout.

The payments landscape has rapidly evolved as a result. Now, nearly a fifth of UK adults are using BNPL services once a month. It is a trend that is set to continue, with e-commerce predicted to grow by 60% to 2024, reaching an estimated market size of $7.3 trillion globally.

Retail finance products are being embraced by consumers, but the technology needs to evolve further to ensure that cart abandonment continues to be reduced. Platforms that provide a multi-lender, multi-product offering will play a key role in reducing abandonment and converting sales by providing greater breadth on the basket type and depth on the acceptance rate for consumers. This market aggregation is already being provided by businesses such as Deko.

The future of fintech is multi-lender finance

Technology lies at the heart of the revolution in checkout finance. Early BNPL offerings in the UK have embraced this, using straightforward single lender products. Now, as demand grows, there is a need to work with multiple lenders to achieve broader credit acceptance, wider basket ranges and therefore higher conversion rates.

The next wave of innovation will offer whole-of-market aggregation across short-term BNPL and higher value and longer-term instalment finance, operating across a wide spectrum of risk appetite across a panel of lenders. This will mean fewer abandoned baskets and more sales.

Platforms that are structured in this way can prevent checkout conversions from being bound by a single lender. By automatically guaranteeing the best match between consumers, merchants and lenders, merchants gain an average increase in sales of almost 30% (versus just having one provider).

Retail finance innovations provide a one-stop-shop for maximising sales

By way of comparison, 60-70 years ago, credit cards were the retail finance game-changers of the day, with issuer banks providing a single source of credit. But consumers soon found that one lender was insufficient. This led to wallets bulging with plastic and complicated repayment schedules.

In the modern-day era of BNPL, a multi-lender approach makes the purchasing experience simple, maximising the chances of baskets being converted with a single click of a button.  This makes things much more convenient for consumers, but the whole process of installing and using retail finance solutions also needs to be easy for retailers.

To help merchants benefit from the increase in sales and minimise disruption to existing business operations, providers will need to ensure that the integration process of retail finance solutions is as seamless as possible. Deko’s solutions, for example, can be plugged into any existing infrastructure in as little as 24 hours.

The next phase in the evolution of payments

The pandemic has propelled the shift towards online retail, and payment solutions likewise need to evolve. The future of this innovation is ‘one-stop-shop’ checkout finance platforms that can cover any basket, of any size, at any time. This will strengthen buying power for customers, and reduce cart abandonment for retailers. We have entered a new era of payments, and merchants deserve innovation that will kickstart consumer activity.