According to Nicole Reyhle, the founder of Retail Minded Magazine, the pandemic was a turning point for flexible payment solutions.
“From a consumer perspective, customers were challenged with change,” she said. “And although many customers were frustrated, along the way they realized there’s a lot of new conveniences and new ways for them to shop.”
Modern layaway
As of June, 6.2 million Americans were unemployed because their employer closed or lost business due to the pandemic. In May 2020, 49.8 million Americans were out of work. This has caused financial strain, and flexible payment solutions can help reduce stress as consumers pay their bills.
Reyhle encourages business decision-makers to welcome payment opportunities into their collective consumer “path to purchase.”
For example, payments provider and shopping service Klarna, which has a “buy now and pay later” (BNPL) model, has had impressive growth. The service splits payments for purchases into four installments. The service has 90 million global active users and 2 million transactions a day. Klarna has over 200,000 retail partners, including H&M, IKEA, Nike, Samsung, and others.
Other BNPL providers, including Affirm and Splitit, promise no interest or late fees. These convenient, hassle-free, and interest-free installment payment solutions are an alternative to credit cards and give consumers added purchasing power.
“It’s essentially a modern layaway, but the very cool thing is the retailer or the merchant receives their money right away when that purchase is made,” said Reyhle, noting the services are popular across many industries, including fashion, furniture, and luxury items.
Integration
Businesses need to make sure these applications, as well as others like Venmo and Apple Pay, are integrated into the company’s point of sale.
Reyhle says younger consumers don’t want to use credit cards like the ones their parents and grandparents used.
“Where and how they choose to spend their money is important for them,” she said. “They don’t want to carry debt, so they look at this ‘buy now, pay later’ as a savvier way to make purchases.”
Businesses like this payment option, too, because it can increase sales, especially for big-ticket items, which are more affordable when paid for in installments. For example, countertop purified water solution company Virgin Pure partnered with Splitit and had a 78 percent increase in checkout conversion and a 10 percent reduction in cart abandonment rates.
Reyhle says millennials are more likely than others to buy an item the first time they see it. This impulse buying contributes to a significant percentage of a retailer’s total revenue.
“If you are looking to strengthen your conversion of customers, introducing this buy now, pay later experience into your transaction options is highly desirable,” she said. “You want to convert your customers as quickly as possible, and by getting consumers like millennials to buy something now even though they want to pay later, they look at it as a better buying experience.”