How BNPL can help consumer brands save $4 trillion in losses

Shamolie Oberoi   /    Content Marketing Specialist    /    2021-11-09

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As per recent reports, brands with websites saw their traffic increase by close to 90% as compared to 2020. This increasing internet penetration is just one of the trends that direct-to-consumer (D2C) brands have capitalized on in order to grow into a USD 44 Bn sector. For these brands, A penny saved is a penny earned.

These digital-first brands reach their customers directly by removing aggregator models such as distribution and wholesale from the equation. The D2C success story is a result of their keen understanding of consumer needs that aren’t being met by legacy brands. After all, interacting directly with customers results in reams of data that these brands can use to customize and personalize products and promotions.

This, coupled with their often simple, less ‘corporate’ personas, have  contributed to their rising popularity - the sector is set to touch USD 100 Bn by 2025.

However, an area they need to consistently work is establishing trust and credibility - one that legacy brands already have a leg-up on, purely by virtue of how long they’ve been around. And what’s one of the easiest ways to ensure customers lose faith in your brand and never come back?

A poor checkout experience. It’s what makes over 30% of shoppers abandon their carts before completing their purchases. And it’s what results in e-commerce stores losing 75% of their sales.

Conversely, ensuring a smooth payment process is also one of the best ways to boost customer loyalty. An effective way in which to do this is by offering several convenient payment options at the online point of sale.

In this article, we’ll look at one such option - Buy Now, Pay Later (BNPL) - and what it can do for D2C brands that are competing with larger, more well-established counterparts.

Lower cart abandonment rates

Be it D2C or B2C, cart abandonment rates are approximately 75% across brands. This costs brands a combined USD 4 Tn - an astonishing amount of lost revenue. And most often, cart abandonment comes down to two factors - the time taken to check out and the price of the product(s). This is where BNPL comes in. Through it, consumers apply and receive instant approval at checkout when making a purchase. Credit is offered in-context, and more importantly, right when the customer needs - thus requiring minimal effort on their part.

Improve customer experience

Offering a payment method like BNPL, that is so heavily pivoted towards customer convenience, shows shoppers that you are responding to their changing needs. While they’re looking for easy and quick payment, they’re also expecting sophistication and accuracy - and BNPL ticks both boxes. Customers are underwritten quickly and accurately at checkout, based on which they are given approval (or not), instantly. The seamlessness of the process is complemented by the fact that the price of the product is broken up into affordable instalments, with no hidden fees as long as monthly payments are made on time.

Build trust

D2C brands are competing with well-established legacy brands, and trust is their major battleground. And that’s where BNPL can give them the edge they need. The payment method has an upper hand on credit cards, which come with hidden charges, fees, and surcharges. BNPL, on the other hand, is as straightforward and transparent as it can get - it involves minimal upfront commitment, zero hidden fees, and flexibility that’s geared for customer convenience.

Make your business model viable

To put it simply -  the ease of BNPL ensures first-time customers become loyal repeat customers. As new kids on the block, retaining customers is key to any D2C brand’s success. According to research, it costs 5x more to acquire a new customer than keep a current one. In addition, just a 5% increase in customer retention can increase brand profits by 25% to 95%. Considering these numbers, it’s evident that offering BNPL is an effective way to optimize profits while ensuring higher customer lifetime value.

Conclusion

While BNPL is seen as a shopper-centric payment solution, it comes with its fair share of benefits for businesses too. With D2C brands mushrooming across the country, the fight to stand out will be a tough one - and BNPL could make all the difference. The best part, however, is this. D2C brands needn’t turn to a bank and handle complex compliances to offer new credit products. Instead, they can simply partner with FinTechs that offer an end-to-end lending stack. Be it compliances, capital, or underwriting, leaving it all to a third party leaves brands with the time and resources to focus on their core business offerings. Our lending stack brings together workflows, compliance integrations, risk management and lender integrations in the form of a simple drop in widget. In essence, we’ve done the work that goes behind the scenes when offering a lending product. What’s more, our developer-friendly, API-first approach ensures easy integration, maintenance and updation of the technology suite.