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Editor's Choice Europe Paytech Thought Leadership

Payments Evolution: New Buy Now Pay Later Fintech is Upending the Retail Sector

The UK retail sector is undergoing a revolution in consumer behaviour, leaving many merchants with stark choices to make about their business models. Two years of the global pandemic and its associated restrictions on movement have turbocharged a seismic structural shift from in-store to online shopping.

Fuelling this trend even further have been recent innovations in financial technology that make it easier and more convenient for retail consumers to purchase the items they need. The sheer pace of change has put players in the retail and payments landscape under pressure to adapt and offer greater flexibility, and checkout finance has emerged as a key transformation in the sector.

Rob Fernandes is Chief Product Officer of Deko, the retail finance ecosystem. His experience includes 20 years in payments and fintech, leading product strategy across a number of businesses as well as advising many others including Wepay, Vocalink, Nexi, Paysafe, Natwest Tyl, Yoyo Wallet and Tink. 

Here he shares his thoughts on how new buy now pay later (BNPL) fintech is upending the retail sector.

Going beyond mainstream BNPL

With the UK’s e-commerce market forecast to be worth £264billion by 2024, a 37 per cent increase on 2020 levels, the significance of checkout finance will only continue to grow. Yet the one-size-fits-all approach used by many BNPL brands has its limitations. Early BNPL offerings in the UK boosted conversion rates using simple, single lender products. But, despite their rapid growth, demand in the market has evolved across different sectors and basket sizes and it is now possible to further optimise acceptance for long-term success.

While there have been innovations in consumer experiences that have increased checkout impact for merchants, less focus has been given to boosting flexibility and coverage of financial products to address different consumers and their purchase goals. Nor has there been enough attention paid to accelerating the integration of these solutions, broadening sector reach, and making everything available through one platform.

Mainstream BNPL products are already going beyond the limitations of traditional cash and credit cards – spending via this method in the UK is forecast to rise from £9.6billion in 2020 to £26.4billion in 2024. Checkout finance products are increasingly expected as standard; already almost 9.5 million UK consumers avoid retailers that do not offer BNPL at checkout and nearly a fifth of UK adults now use BNPL services once a month.

The next stage of innovation will include platforms that aggregate both short-term BNPL and higher value and longer-term monthly instalment finance. They will also operate across a wide spectrum of risk appetites with a panel of lenders including prime and near-prime underwriters, and credit providers covering different sector demands. This will mean far fewer abandoned baskets and more sales – helping merchants make the most of their e-commerce capabilities.

Catering for all basket sizes

In the UK, some 41 per cent of consumers have abandoned a transaction during the online checkout process, while 24 per cent have walked away from a purchase in physical stores. A Barclaycard survey also found that, on average, British shoppers abandon £30 in online shopping baskets per month. A lack of payment options is a leading reason for this, with research showing that close to 10 million Britons chose not to buy from merchants that don’t offer alternative payment methods at checkout.

With the sharp rise in living costs due to inflation unlikely to slow down in the near future, many customers are reluctant to spend one-off sums of money on certain purchases. This doesn’t merely affect sales in smaller price ranges such as beauty or fashion, but can impact merchants who offer services like online education, healthcare, or home improvement. Providing finance options for a range of basket sizes is imperative to support the businesses underpinning the UK economy.

Deko’s technology matches customers with a marketplace of lenders during the purchase journey, increasing the approval rate of applications for finance at checkout and giving consumers the best chance of securing the goods or services they want. By guaranteeing the best match between consumers, merchants and lenders, merchants can gain an average increase in sales of almost 30 per cent. With its proven plugins, the platform can also be installed into existing infrastructure in as little as 24 hours, ensuring minimal disruption to merchants’ business operations while delivering the finance tools their customers need online and in-store.

The next wave in payments innovation is here

It is clear that the upward trend driven by a convergence in online retail and fintech is accelerating, and the payments industry is alive with innovation. Checkout finance represents a permanent shift in the way in which both retailers and customers view payments based on choice and flexibility. But new platforms are going a step further – simultaneously optimising customer experience and coverage and acceptance too. Checkout finance aggregation can take this payments evolution to the next level, offering tailored, conversion-focused solutions to retailers and consumers alike.


About the company: Deko is a multi-product, multi-lender retail finance ecosystem focused on expanding access to retail finance for lenders, merchants and customers.


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