After gaining momentum during the 2020 lockdown, the Buy Now, Pay Later (BNPL) market continues to expand at speed and has become a regular feature at online checkouts. 2 in 5 adults now use BNPL options when shopping online, and in Gen Z this number is 7 out of 10. The market growth predictions are staggering, with experts suggesting the sector may grow by 10 or 15 times by 2025 and have an estimated value of £4 trillion by 2030.

BNPL is undoubtedly filling a gap between the appetite for and access to credit in certain demographics and the number of BNPL providers operating in the UK has swelled to 20. But with so many options to choose from, how can ecommerce businesses leverage the BNPL solutions on offer to maximise checkout conversion while maintaining customer centricity? 

How many payment options is optimal?

Offering customers multiple ways to pay is a reliable way to boost checkout conversion rates and encourage customer loyalty. But with a variety of BNPL providers now operating in the UK, it is important to consider the issue of checkout crowding.

Customer-centric merchants want to provide more options for their customers, and it is likely we will see ecommerce sites listing a number of BNPL providers at checkout. While this approach allows customers to select their preferred BNPL provider, it could also have a negative impact and result in confused shoppers abandoning their cart when faced with an overwhelming number of choices.

Realistically, there is no one-size-fits-all approach to the number of payments options that ecommerce merchants should offer. But those merchants who leverage historical and real-time payment data and possess a rounded understanding of customer payment preferences will be better equipped to find the optimal number of checkout options for their customer base.

Finding a balance between friction and clarity

Customers increasingly desire faster, more seamless and highly convenient services when it comes to payments, and the BNPL sector is no exception to this. As BNPL solutions become a more regular feature in ecommerce checkout flows and the cost-of-living crisis pulls new consumers into the market, a move towards a frictionless BNPL checkout experience has raised concerns about customer education. Namely, a lack of awareness from individuals that they are entering into a credit arrangement and consciousness about the level of debt they are taking on. 

Introducing some level of friction in the BNPL journey, whether through an informative pop up or redirection, helps consumers gain an awareness that they are entering into a legally-binding financial arrangement. Steve Wishart, Director of Fintech at TransUnion UK commented at the Open Banking Expo Buy Now, Pay Later Symposium that “adding friction at the right time” can be crucial to ensuring that the customer is protected and in control.

From a regulatory perspective, a clamp-down on irresponsible lending means that BNPL providers must now explain their terms to customers in a way that is “fair, clear and not misleading”. While delinquency rates for BNPL lending currently sit in line with other credit products, a broadening of the BNPL customer base due to the challenging economic climate makes positive friction in the BNPL experience crucial to ensure responsible lending.

As this sector continues to evolve, it will be merchants who find the right balance between financial transparency and ease of use for their customers that are most able to maintain low delinquency rates without compromising checkout conversion.