The details of the first-ever online transaction are heavily debated. Some claim the first legitimate online transaction took place in 1994 on a small website called NetMarket, where a CD of Sting’s “Ten Summoner’s Tales” was sold for $12.48. Others believe that the first transaction took place far earlier, in the 70s when a group of Stanford students controversially arranged the purchase of marijuana.
While potentially nefarious behaviours still shroud some online shopping, it has become a favourite for many. And with online sales making up nearly a third of all sales in the UK last year, it’s clear our time spent online forms a huge part of how we legitimately interact with brands today.
It’s never been easier to find the item you want either; a couple of clicks later, the purchase is complete, and soon enough, it shows up at your door! It’s almost too convenient.
Add the possibility to split payments across several instalments, with a simple tick, for free, with no credit check, and buying online has been made even more attractive.
Buy Now Pay Later (BNPL) payment options are rife across online commerce, and most popular online retailers now provide the option. But while it has made millions of goods more affordable for customers, there are growing concerns around its ethics and whether consumers need to be better informed and protected. In the UK, the government has already set out their intentions for the FCA to regulate these products in future.
This is particularly clear as new data shows that nearly half of 16-to-24 year-olds used BNPL services last year despite age restrictions and ethics experts pointing out that “It’s just saying debt is fun.”
Most BNPL companies are yet to make a profit, and in some cases, consumers have benefitted from pre-IPO targets of gaining market share over currency, but that will come to an end sooner or later. It will be intriguing, and one could paint a bleak picture, to see how brands will behave once the need to make a profit comes into play.
Brands have a responsibility to help their customers make the right decision. And by “right” decision, it doesn’t mean businesses should force customers to make purchases in a particular way – frankly, it’s not their place, nor is it a burden they should want to take on. It’s about businesses understanding their customers better and guiding them to make the “right” decisions for them.
The key to this lies with customer experience (CX). Good CX fundamentally means caring for your customers, which makes them feel good about your brand. It can even turn around bad-on-paper experiences; say, you order clothes and receive the wrong size, if it’s fixed quickly and easily, your customers will respond well. ASOS has done this exceptionally, with people choosing to buy with them over competitors because of their reputation for convenient and quick returns.
So, when looking at their user journey or CX, brands need to carefully consider what they are including. Some easily missed elements can be a pivotal part of the experience and a great reputation builder. And this applies to BNPL schemes; often, retailers don’t view their plug-in partners as part of their user journey. They see it as an ‘offshored’ part of the experience and entirely wash their hands of responsibility.
Herein lies an interesting ethical challenge. If one of your customers opts to use BNPL to pay for a low-cost item, should you be selling more to that person?
Retailers can make assumptions about that customer’s financial situation based on the decision to pay in instalments, giving them insight into what experience they need. Retailers should be asking, is there a way of optimising this experience and doing the right thing? It would be an innovative behaviour for brands to look at saving structures rather than loans; and a fantastic positive reputation booster I bet.
Adding steps to the payment journey may seem counter-intuitive, but offering customers a chance to consider what they’re buying can be an essential step. A smooth basket/checkout experience should be a given, but when it comes to BNPL, perhaps friction can be good and will actually help protect customers. And ultimately, this will increase loyalty and long-term trust in the retailers.
It is basic; using information about your customers to understand them better will drive loyalty. Greater personalisation based on need is what all brands should strive for.
Brands are already off to a flying start when people want to buy a low priced item and spread the cost over three months – it shows they really want that item. So offering personalised deals that create healthier spending habits can only double down on this loyalty. It also ensures the value brands bring to their customers goes beyond that single shopping experience.
There is an even bigger opportunity for brands when considering Gen Z consumers. Not only are Gen Z excellent long-term customers – people tend to earn more money as they grow older – but they are primed to be educated about healthy financial habits. Two in five Gen Z shoppers using BNPL say they feel ‘overwhelmed’ by repayments. Retailers and their partners can guide and inspire them to shop within their means and make debt education an engaging part of the check-out experience.
So, as the BNPL scramble rages on, with the likes of Klarna gobbling up market share and the likes of PayPal and retail banks snapping at its heels, it’s a conversation that is just beginning.
But with regulations on the horizon and bad press piling up, it is a moment of opportunity to make an often clunky part of the CX both exciting and valuable. And the earlier brands and retailers decide to guide and inspire people to shop within their means, the more they have to win.
This article was originally published in Finance Digest.