Editor's Introduction: In recent years, BNPL in the European and American markets has been very hot, and many head brands have begun to use BNPL to pay. What exactly is BNPL? Why is it rising in Europe and the United States? And what can it bring to the sea enterprise? The author of this article has made an analysis of this, let's take a look at it.
In recent years, Inpander has observed that in the European and American markets, BNPL is on fire, not only ZARA, Sephora, IKEA, adidas, Nike, Dyson and other familiar head brands have begun to use BNPL payment, e-commerce platform giant Amazon has also launched its own BNPL products.
The best of China's overseas brands such as SHEIN, DJI, Xiaomi, etc. have also quickly caught up with this wave of payment replacement.
So, what exactly is BNPL? Why is it rising in Europe and the United States? And what can it bring to the sea enterprise?
In this article, the professional overseas influencer marketing agency Inpander provides you with an in-depth analysis~
01 BNPL Is It?
BNPL, buy-before-pay Buy Now Pay Later, as the name suggests, is a way to allow users to place an order first and pay for the goods when they arrive.
This is a short-term loan product that allows consumers to repay the loan at a certain date in the future with little or no interest. BNPL is a new version of installment payments, with more modern and faster payment features, consumers can immediately access the product, but also immediately repay debt.
According to a worldpay report, BNPL will account for 2.1% of global e-commerce payments in 2020, but is expected to double to 4.2% by 2024, and even reach 13.6% in Europe, the home of the global leader Klarna. In the UK in particular, data from Finder.com shows that four out of ten consumers in the UK have used BNPL services, while more than half (52%) of consumers say they have used BNPL services more during the pandemic.
Research by the German online research company yStats.com shows that the European market is a good fit for BNPL services.
A similar approach, i.e. payment by invoice (also known as payment after invoice now) has appeared in some markets, including Germany.
Among them, German consumers prefer "transparent conditions" and "no interest" for BNPL services.
In the UK, consumers are more inclined to pay in installments than to pay in full later.
At first glance, BNPL seems to be like a general card-free staging, why can it become the focus of the European and American markets?
02 BNPL passwords popular in Europe and the United States
1. Impact of the pandemic
One of the most important reasons for the rapid rise of BNPL in Europe and the United States in recent years is the impact of the epidemic.
Taking the United States as an example, according to the annual report of the U.S. Bureau of Labor Statistics, after the epidemic, disposable income in the United States fell by 9.5% at an annual rate, and personal consumption expenditure was calculated at an annual interest rate of 2.5%. At a time when cash flow is tight on the hands of many people, BNPL undoubtedly provides a new channel for these people to regain new opportunities to use credit tools.
2. The shopping community is younger
According to data learned by Impander, the proportion of Gen Z in the United States that uses BNPL has increased sixfold from 6% in 2019 to 36% in 2021. Millennials have more than doubled their use of BNPL to 41% since 2019. Generation X adoption has more than tripled, and even baby boomers are starting to take action.
For those young people in Europe and the United States who have just entered the society and do not have much economic foundation, it is very convenient to open a BNPL model with convenient opening, flexible and tolerant repayment terms, and convenient payment methods compared with credit cards that require credit checks to open new accounts, theft problems, higher and higher interest rates, and increasingly stringent repayment penalty clauses.
Why does BNPL attract young people in Europe and the United States?
1) It is convenient to open and does not affect the credit report
BNPL account opening is simple and easy, foreign users even need to provide a mobile phone number to complete the registration, quickly start using BNPL.
At the same time, unlike Huabei, the consumption record of buying first and paying later is not linked to the consumer's personal credit report. In this way, the pressure on users to repay the loan is less, and the merchant also improves the customer conversion rate and repurchase rate.
2) Flexible and tolerant repayment period and repayment method
- Grace period grace period: If a user accidentally misses the repayment date, BNPL companies will generally send email reminders first, and then charge a low overdue fee (usually $7-10) later.
- Interest-free installments over a certain time frame: Customers can optimize their shopping experience with fast checkout (one-click checkout after simple registration) and multiple installment payment methods (three, six or twelve months) after spending through BNPL, such as the option to pay $335 per month for six months with 0% interest and no other handling fees.
3) Payment method is more convenient
In the European and American markets, many brands have adopted the DTC model to establish their own independent stations. The form of foreign independent stations is not limited by the platform, and can quickly form its own brand style, and the payment cycle is fast.
But the drawbacks brought about by this are also obvious, some users will buy in different independent stations, independent stations require users to fill in their own detailed payment information every time they place an order, the payment process is complex and cumbersome, and consumers lose the purchase when filling in information.
In bnpl mode, because there is no need to pay when placing an order, users only need to fill in their own email address and shipping address to place an order. After receiving the product, the user will receive an email from BNPL and then select the payment method and time schedule to check out.
3. Improve the god assist of taking and transforming
In market practice, studies have shown that in the mobile payment scenario, the global online shopping cart abandonment payment accounts for about 86%, BNPL payment can effectively improve this problem, so that consumers in the empty shopping cart, reduce the proportion of orders abandoned payment, so that merchants get more orders.
SimilarWeb surveyed the top 100 fashion apparel websites in the United States and found that 50 websites offer BNPL payment methods, while the other 50 do not, and their website conversion rates are 4.5% and 2.4%, respectively, which is almost double the gap.
03How does BNPL empower marketing?
A notable case is the Swedish financial payment unicorn Klarna, which has a market capitalization of more than $10 billion, which squeezed into the top 10 in the number of shopping APP downloads in the US app store in the fourth quarter of 2020, and Business Insider also estimates that Klarna will have 48.6% of BNPL users in the US by the end of 2021; in their home base , Europe, Klarna's downloads account for 64% of the BNPL service provider category. Significantly ahead of other buy-first-pay financial payment instruments.
With Klarna's help, 250,000 retailers, including Nike, H&M, Sephora, Samsung, IKEA, Spotify, and others, have increased the average order value through BNPL services to compete more fairly with brick-and-mortar stores on the street.
In the case of ZenPro, a sound equipment retailer, after accessing Klarna's payment function, orders paid for using Klarna rolled in. The amount of orders facilitated by buying first and paying later has doubled compared to other payment methods. This advantage helps them compete with large audio sellers who offer traditional instant credit.
Arguably, the appeal of BNPL is obvious. However, simply adding a buy-before-pay option button to the checkout page is not enough to ensure that conversion rates or sales are effectively increased.
So how can overseas merchants ensure that by buying first and paying later, they can acquire new customers without affecting their existing sales paid by credit card?
1. Is your brand suitable for BNPL services?
If you're a merchant from one of these industries, adding buy-first-pay-later to the payment process is definitely the next step you should consider.
The retail industry, such as fast fashion brands, such as SHEIN, Uniqlo, ZARA, etc. are using the service, and the fashion industry accounts for 25% of the websites that support Klarna or Afterpay, accounting for the highest proportion, followed by beauty categories. In recent years, in the tourism and hospitality industry, buy-first-come-later is also booming.
In addition, in some countries, because health care is not run by the government, it is also widely used in the field of health care to buy first and pay later.
At the same time, bnplate model is also suitable for small start-up brands. According to statistics, 85% of websites that support Klarna or Afterpay have less than 100,000 monthly visits. Therefore, after accessing BNPL, whether it can improve the conversion rate of website views through a better consumer experience is a point that brands need to pay attention to.
2. Choose the right payment provider
When choosing a service provider, you should ensure that the installment plan they provide and the threshold of the minimum amount match the price of your goods and the needs of your customers. Avoid focusing only on the service provider's conversion rate, unit price, and transaction value – ask about payment success rates and how they compare to other payment methods. Evaluate, test, and continually adjust your buy-first-pay options until you find the best way to reach your target customers.
Introduction of major BNPL service providers in Europe and the United States:
1) Klarna: Europe's largest unicorn
Founded in Sweden in 2005, bnp is the second largest bnpl in the global market share, behind the established payments overlord PayPal.
The company's website disclosure shows that users who shop at the retailers Klarna cooperates with can choose to pay in 4 installments, pay a 25% down payment when shopping, and pay the balance in 3 installments, pay every two weeks, 0 interest and 0 handling fees.
What if the user is overdue? Klarna rules: If it is more than 10 days overdue, Klarna will first send an email to the customer to remind the customer of the repayment, and then try to urge the customer to repay. After two failed collections, Klarna charges customers a late fee of up to $7, but the overdue fee does not exceed 25% of the order value.
At the same time, Klarna also provides users with 6-36 months of consumption instalment services, of which the daily interest rate of installments for more than 6 months is 0.05477%, equivalent to 19.99% of APR. Users will be charged a $25 overdue fee for the first overdue, and a $35 overdue fee for another overdue within 6 months, but the overdue fee will not exceed the customer's minimum repayment amount per period.
Moreover, Klarna has also cooperated with some merchants to launch a 30-day payment service after receiving the goods. Consumers shop online, after receiving the goods, they can try it on or try it on first, pay within 30 days after satisfaction, and return it within 30 days if they are not satisfied, without charging any fees during the period.
2) Affirm: American version of Huabei
Affirm focuses on the U.S. and Canadian markets, and its business platform consists of three core elements:
- Consumer-Facing Payment Solutions (BNPL)
- Merchant Commerce Solutions
- Consumer-centric applications
The usage scenarios and terms of its core payment + installment solution are as follows:
- Channels: You can choose the Afrim service through the offline checkout counter/ the payment interface of other shopping platforms/ Affirm's APP or the web-side own mall. On the interface of selecting payment, the payment service providers of the same level are credit card service providers, as well as other cheque/remittance service providers. There are a large number of high-quality merchants in the own mall.
- Impact of credit scores: Affirm requires consumers to have a Social Security card number and an age limit of 18 years. Opening an account, checking interest rate levels, or using installment payment services, if not defaulting, will not affect your credit rating; a good credit history will positively affect your credit score.
- Annual fees and penalties: If you use Afrim for payment, or an installment loan, there will be no annual fee for using the card, and there will be no penalty for late payment, but the credit score will be affected after late payment, and the related services of Afrim can no longer be used later.
- Installment or credit term: Usually 3/6/12 months, for particularly large loans it may be 48 months, for smaller ones it may be 1-3 months, and for shorter 0 interest payment options are 4 installments paid every two weeks.
- Interest range: 0-30%, depending on the user's choice of installment method and Afrim's agreement with the merchant; some merchants will have a 0% APR on their own marketplace.
3. Understand regulatory policies
According to Capco's November 2020 report, almost half of UK BNPL users aged between 18 and 34 said they missed BNPL payments. The regulatory environment changed after the December ban on Klarna's social media campaigns, following several marketing campaigns that the Advertising Standard Authority considered controversial.
Concerns about the financial risks involved in bnpies have led the Financial Conduct Authority (FCA) to regulate these products and have called on BNPL companies to conduct customer qualification checks in February this year.
In October 2021, Klarna announced that they were taking steps to minimize risk by making new operational changes to the way they conducted their business, such as clarifying language in terms and conditions and informing customers at checkout that BNPL products were credit products and that there was a risk of late payments.
As bnpone the world sweeps the globe and regulation takes shape, making these changes before formal regulation is critical for companies looking to take advantage of BNPL.
4. Clarify payment terms and reminders
Offer clear and flexible payment terms. Currently, 31% of BNPL users are late in making payments or charging fees, resulting in a negative user experience that could affect their future behavior.
Brands can help minimize late fees by easily accessing online support or segmenting payment terms for individual products in marketing communications both inside and outside the app.
5. Show the buy-before-pay option at the beginning of the payment process
Why do I have to wait until the checkout page to complete the order? With dynamic page messaging, you can show your buy-first-pay option in advance at critical stages of customer decision-making. Klarna says promotional display, including the display of installment payment methods on product pages, can increase the average unit price by up to 25 percent.
Case: Charlotte Tilbury (beauty brand)
Charlotte Tilbury is a high-end beauty brand that targets younger users due to its high price, with facebook Audience Insights showing that its audience is less than 6.5% aged between 18-24.
It's also a big reason why the brand will integrate BNPL provider Klarna so significantly into its user journey.
On the product page, you'll see Klarna's proposal appear under the price tag: Divide your order into three installments at no cost.
Once you add items to your cart, Klarna stands out even more. The first page of the checkout process mentions BNPL's buy-first-pay service no less than three times:
- Banner at the top of the page urging shoppers to "pay in 3 installments"
- Under the prices in the "Your Shopping Bag" section, there are explanations of these payment methods
- Klarna logo below the checkout button
6. Take the initiative and seize all joint marketing opportunities
According to the report, 54% of UK merchants will use co-brand marketing campaigns to attract new customers, while 23% of merchants are able to track their customers directly referred by buy-first-pay service providers.
So don't miss out on this approach to customer acquisition, contact your buy-now, pay-after-buy partner to find out what support services are available and how to access them. Whether it's a merchant directory, or marketing resources like highlights, seasonal promotions, or pop-up ads, you can think about it to help you increase brand awareness and sales.
7. Personalize experiences based on data
WHEN IT IS TIME FOR A BFO MARKETER DELIVERS PURCHASE DECISIONS TO MERCHANTS, THERE ARE OFTEN BLIND SPOTS IN THEIR DATA. Brands can support their strategy by building consumer profiles in their marketing communications to avoid these blind spots.
For example, by creating polls in email and mobile marketing campaigns, marketers can create customer segment profiles based on lifestyle, interests, or goals and use them for tailored interactions throughout their lifecycle.
8. Participate in the entire purchase process
Success depends on interacting with consumers throughout the customer journey. By creating a seamless cross-channel experience, brands can engage customers from pre-order to final payment.
Marketers can build personalized product recommendations and offers by integrating APIs directly into their mobile apps or email marketing campaigns. The biggest players are now integrating with shopping platforms, emerging categories such as Etsy or Wayfair, and e-commerce checkouts, which have expanded their presence as consumers browse and make purchases.
Finally, once a purchase is made, brands must explicitly step up payment times to ensure a positive experience for customers.
Source public number: Inpander to the sea (ID: gh_eeba4131474f), focusing on overseas influencer marketing.
This article is published by everyone is a product manager cooperative media @Inpander to go to sea with permission, and it is forbidden to reprint without permission.
The title image is from Unsplash and is based on the CC0 protocol.