Will Buy Now, Pay Later be key to driving economic recovery in 2021
It’s well documented that the retail sector has been one of the hardest hit industries globally due to the pandemic. It became crucial to find innovative, digital solutions quickly to enable retailers to survive in a challenging economic climate - whilst maintaining a seamless customer experience. Many industries had to adapt to ensure customer loyalty by offering honest, transparent financing solutions with no hidden fees and no debt traps.
Buy Now, Pay Later (BNPL) initiatives saw a massive surge in popularity globally and locally during the pandemic, as commerce moved online and the prospect of flexible, delayed payment became more attractive in light of financial uncertainty.
Shoppers from younger generations who are increasingly adverse to traditional consumer credit can enjoy a safe and seamless digital experience, with defined payment terms. BNPL acts as a great alternative to cash on delivery - traditionally a mainstay of the Middle East – as it skips the operational complexity and cash flow insecurity. BNPL is being touted not only as an alternative to cash on delivery, but as an alternative to credit cards too, something that appeals to younger generations who are keen to avoid open-ended debt. Not forgetting the hygienic benefits of not having to handle cash.
Customer trust is paramount for any business. BNPL means no hidden fees and surprise credit card statements at the end of the month. According to Bain, 64 percent of customers in the MENA region prefer cash on delivery because they only want to pay once they have the product(s) in hand. The lack of trust is what makes people prefer cash. BNPL offers an alternative by putting customers in control and making them feel safe without retailers having to take on risk. It also allows customers to receive the product and pay for it in smaller, more affordable chunks as opposed to making a big financial commitment upfront in one online transaction.
Increasing conversion and repeat purchases
Once customers take their purchases home and pay a fraction of the price upfront without any hidden fees, they’re far more likely to trust the process and the retailer and make repeat purchases. The rise of BNPL in the region has also helped retailers acquire new customers by making their products more accessible, reducing cart abandonment.
Boosting average basket size
BNPL helps retailers by helping their customers. Shoppers increase their purchasing power by splitting their purchases into smaller, more affordable payments at no interest. This means retailers can facilitate sales on higher priced items and grow their average basket sizes, while at the same time encourage responsible shopping.
High customer satisfaction
BNPL gives the customer the option to get the product they want, when they want it. Creating a frictionless shopping experience that’s built on trust, not interest, gives shoppers a reason to come back again and again.