The Retailer Winter Edition 2023

THE RE TA I L ER

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DESPITE A ROCKY YEAR, BNPL REMAINS STRONG

Monica Eaton Founder Chargebacks911

B uy now pay later—or BNPL—is very popular with both merchants and consumers. The payment model allows consumers to arrange flexible payment plans without the hassle of credit approval. For merchants, BNPL presents the opportunity to capture sales from previously untapped revenue streams and expand their customer base. Emerging BNPL giants like Klarna and Afterpay offer simplistic, four-installment payments options. Consumers enjoy easy sign-up, while merchants get helpful support. All that being said, there have been a number of concerns about BNPL as a payment method in recent months. The Trouble With BNPL First, it’s important to recognize that an objective, “perfect” payment platform does not exist. Every payment system in theworld struggleswith issues like fraud, charge backs, and customer satisfaction. On that score, BNPL is in good company. At issue is the fact that BNPL does proffer a complex series of issues that are unique to the platform itself. In June, The Guardian reported that one-third of BNPL users in the UK said they were unable to make payments for a purchase they’d made. This is a troubling matter; some would argue that BNPL options create perverse incentives, leading people to spend beyond their means and end up getting into debt. Whenmagnified to scale, the broader implications of such concerns could lay the groundwork for a potential credit crisis. BNPL Remains a Popular Option Despite the problems outlined above, data from the 2022 Chargeback Field Report shows that BNPL is still hot among consumers andmerchants. Interest shows no real signs of slowing. Thus, it’s best to figure out the right way of adapting to a post-BNPL market. The UK government and the Financial Conduct Authority (FCA) were making moves to subject BNPL lenders to greater regulation. This may be a good start, but ultimately, the key to the success—or failure—of BNPL will depend on how risk factors like consumer behavior, fraud, and other pitfalls are managed.

Any alternative payment platformwill present its own series of challenges; BNPL is no different. To implement wisely, retailers must proceed with caution…and with a plan. Being aware of the drawbacks associatedwith BNPL provides the oppor tunity to craft and refine an actionable mitigation strategy in advance of implementation. Encouraging consumers to shop responsibly isn’t merely the realm of the finance company. Merchants have a responsibility here, as well. Implement BNPL Wisely Much of the onus for a positive BNPL experience restswith themerchants that employ the method. That’s why they must deploy best practices to ensure responsible and proper use. For instance, retailers should: Communicate Clearly The buyer should have a full understanding of the final costs, payment amounts, and terms before completing checkout. This does more than ensure responsible BNPL use. It also communicates to customers that they are shoppingwith an ethical and responsible brand and never leaves them guessing about terms and conditions. Avoid Financing for Low-Ticket Products BNPL has been known to encourage customers to spend outside of their means. To combat this, merchants can set restrictions on itemfinancing to prevent the customer fromoverreliance and exceeding budgetary concerns. While many BNPL companies already do this, merchants can take it a step further by limiting carts in advance of financing, or setting stricter limits for the kinds of purchases that can swiftly add up. Provide a Financing Calculator Encouraging smart money habits is another tactic that can be setup in advance of customer checkout. Keeping a running tally of the projected monthlypayment, alongside the customer’s shopping cart, can be immensely helpful for consumers and merchants alike. Thisway, the customer is leftwith zero illusions about the purchases they are making, how much they will cost to finance, and how often those payments will be processed.