BNPL 2.0: More than transactional, it is a relational product

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In 2018, 1.6 million U.S. consumers used Buy Now Pay Later (BNPL) financing to make a purchase. This year, that number is expected to reach nearly 60 million.

Clearly, consumers like BNPL.

According to an analysis conducted by Shopify, which has introduced BNPL funding as a service that all of its merchants can offer their customers, adding BNPL as a payment option at checkout can lead to a 50% increase in order value and a 28% drop. % decrease in shopping cart abandonment. Clearly, traders benefit from BNPL. Looking back over the past five years, it's easy to say that BNPL created a win-win solution for consumers and merchants and its emergence was inevitable.

However, it wasn't so clear at first. When BNPL began making inroads into merchant payment pages, the benefits were still hypothetical and the risks were very real. Instantly approving a customer for a loan at checkout, then managing and collecting that loan after purchase was a daunting proposition for merchants back then. They have to consider a whirlwind of questions. How do you take out these loans from a credit risk perspective? How to identify and mitigate fraud and facilitate and track loan repayment? How do I process and refund purchase returns when the customer is still paying for the product? How do you collect overdue payments and know if this collection experience will hurt their customers' brand affinity?

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This is where BNPL's third-party vendors come in.

Companies that pioneered the modern version of BNPL have partnered with merchants to integrate on-demand financing into the payment experience. BNPL's providers provided the capital for the loan, facilitated underwriting, and created a distinct brand experience for customers to manage their payments and deal with any outstanding payments. In exchange for a per-loan fee ranging from 3% to 9% of the total transaction amount, BNPL providers took away operational lift and credit, fraud, and brand risk from merchants and allowed them to experiment BNPL.< /p>

These experiments produced exceptional results. The question now is: what do merchants do next?

Here's another stat for you: 61% of BNPL users would rather use a BNPL service offered directly by the merchant they're buying from than go through a third party.

That makes intuitive sense. Consumers choose the merchant because they value the p...