Two-thirds of retailers in the UK have noticed improvements in at least one area of their business sales and performance metrics as a direct result of offering buy now pay later (BNPL) to customers.
According to the most recent analysis by RFI Global, sales conversion was the most common benefit delivered to UK retailers that offered this form of paytech, with 61 per cent indicating that it had improved their access to new-to-business customers.
This ultimately generated growth in revenue for more than half of BNPL-accepting retailers and drove profits for 37 per cent of retailers.
There are now 17 million people in the UK who have or are using BNPL services. According to the data, new customer acquisition improved for 59 per cent of retailers and just under half said customers were making more frequent purchases.
Despite the clear benefits that BNPL delivers for retailers, 63 per cent claim they are still not interested in offering it as a payment method for ‘lack of relevance’.
Some retailers may be wary about the criticism of this soon-to-be-regulated market with concerns that consumers can run into trouble if they miss their payment instalments, leading them into a dangerous spiral of debt.
As covered by The Fintech Times, the UK government announced last month that it will require BNPL providers to conduct credit checks on users of its services and register with the Financial Conduct Authority (FCA), but this may not take effect until 2024.
One in five UK retailers remain concerned about exposing their business to credit risk, according to RFI’s research, thus highlighting a lack of understanding about how BNPL works since the BNPL provider takes that risk, not the retailer.
Mark Schultz, global head of business payments at RFI Global, explains how this misunderstanding could have occurred: “Even though there’s a fee for retailers to offer BNPL as a payment option, most retailers report a clear improvement in sales and other performance metrics.
“Our research shows that the lack of awareness among retailers of the benefits of BNPL is acting as a clear barrier to growth. Rectifying these misperceptions and educating non-accepting retailers will be key to accelerating the uptake of BNPL in the UK and globally.”
There exists a range of incentives for retailers to begin accepting BNPL, including reduced fees, streamlined onboarding and contract flexibility, to which retailers are becoming increasingly receptive.
Yet among those retailers that are yet to accept BNPL, one-third said that nothing could be enough to sway them into accepting the service.
“Further, not being able to access their preferred payment service is one of the key reasons consumers cite as something that can drive them to an alternative retailer,” added Schultz.
“With inflation creating the biggest cost of living crisis to hit UK consumers in decades, it is in the interest of retailers to provide payment choices. Those that do are more likely to increase repeat purchasing and their bottom line.”
