A new report by Power Retail has revealed Buy Now Pay Later (BNPL) services which launched in the Australian market in 2015 are exploding in popularity. The report suggests retailers who ignore BNPL do so at their peril.
The ‘Buy Now, Pay Later – Fad or Future?’ report surveyed 5,000+ retailers and consumers across Australia to discover the pressing issues around BNPL options. The report revealed the importance of BNPL to retail growth and showed how more and more consumers are flocking to utilise the payment option.
Managing Director of Power Retail, Grant Arnott says Australia’s small businesses need to understand BNPL is here to stay.
“BNPL is a serious trend to take notice of right now. In a few years’ time it will no longer be an alternate payment option and will be simply expected by consumers. Also, due to the recent Royal Banking Commission, some consumers have lost trust in the banks and will therefore start trusting a new generation of financial services.”
As a key component of the research, Power Retail conducted in-depth interviews with pureplay and multichannel retailers. They shared their thoughts on BNPL and its effect on their customers’ shopping habits with the overwhelming majority suggesting BNPL had been a benefit for their business and customers.
CEO and Founder of Showpo, Jane Lu says, “Most of our customers don’t have credit cards so BNPL is a great way for them to manage their cash flow.”
While CEO of SHHHSILK, Olivia Carr says, “We took BNPL on to offer payment flexibility to our customers, to increase basket size and also as a new traffic source.”
Arnott suggests BNPL is too big to be ignored. He believes all online retailers should consider having a plan either to embrace BNPL or to help their customers to understand why they don’t offer it.
“This research not only provides online retailers with actionable insights and strategies on BNPL methods, but it provides critical insights into how the market is transforming,” Arnott said.
Key findings from the BNPL research:
- BNPL has reached a critical mass in the Australian online shopper market with in excess of 1.8 million users, and a growth rate of over 120 per cent per annum.
- The most common BNPL transactions are conducted weekly, and most purchases are between $100 and $249.
- The growth in BNPL has been dramatic. From 50,000 transactions per month in April 2016, to 1.9 million transactions in June 2018.
- Both shoppers and retailers agree that those consumers who use BNPL tend to spend more, buy more items, shop more frequently and are more loyal to retailers who provide it.
- The majority of retailers who took on BNPL felt that it had helped conversions and increased profits. Over half felt these effects immediately.
- Once tried, BNPL soon becomes ingrained in regular online shopping behaviour, with 67% of BNPL customers still using the service 12 months on from their initial trial.
- Millennials are currently the primary BNPL segment, but BNPL usage is rapidly expanding to other market segments.