Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.


By Eric Christensen, Chief Payments Officer/Vice President of Product, Digital River

The global pandemic has dramatically accelerated the long-term consumer shift towards ecommerce channels. While the initial explosion in online shopping came out of necessity, with social distancing and shielding requirements restricting people’s ability to shop in store, it is safe to say the trend of online buying isn’t going anywhere. Not only did consumers grow more comfortable with online shopping in 2020, they also drove the adoption of new payment methods for the benefit of shoppers and businesses alike.

With more consumers adopting ecommerce as part of their shopping habits, online payment strategies have become more important than ever. How merchants accept, process, reconcile and manage payments, especially on a global scale, has a direct impact on conversions and revenue. One payment method experiencing tremendous growth in customer adoption is known as Buy Now, Pay Later (BNPL), an option that allows consumers to pay for goods and services in instalments over time, often without interest. According to one recent analysis, the global BNPL platforms market was valued at over £5.2 billion in 2019 and is expected to reach over £24 billion by 2027. A new report commissioned by Klarna, has revealed that BNPL accounted for almost 4% of all online retail sales in the UK in 2020 with over 10 million users.

Paying in instalments is not a new concept; however, recent financial technology has helped to develop a risk algorithm that is making the method more profitable for merchants. At the same time, Gen Z and Millennial generations are demanding choice and tend to be more careful about using traditional credit cards. The current economic climate is expanding the audience for instalment plans to Gen X and Baby Boomer shoppers who might previously have been uncomfortable with the idea. Individuals laid off or furloughed are likely to be very conservative when it comes to spending and BNPL offers those consumers the ability to control payments and avoid putting a large purchase on a credit card where they might also incur interest charges. It also gives consumers the ability to buy something now rather than having to save up for it.

While more consumers and even B2B customers are looking for BNPL, merchants must carefully consider the benefits and risks of implementing this option before adding it to their online stores.

The pros

One of the biggest attractions for brands looking to add BNPL as a payment option is the opportunity to increase revenue. Digital River found brands in the U.K. and Europe saw a 3 percent to 10 percent lift in gross revenue after adding a buy now, pay later option. Another benefit is the potential increase in average order value (AOV). It’s a key selling point for payment providers, including PayPal, which touts at 56 per cent increase in AOV with pay-over-time messaging.

Other benefits involve what happens after the transaction. Among them, the BNPL provider assumes the risk of non-payment and remits funds at the time of shipment, making the merchant whole immediately.

Potential obstacles

A major consideration for merchants is potential revenue lift might not exceed the increased cost of offering BNPL financing. A merchant generally pays a third-party financial technology provider a certain percentage per transaction. As such, merchants need to make sure the margin on the product is big enough to withstand that fee. If a merchant is geared toward selling smaller items that won’t produce that margin, they can consider adding a different payment method like one-touch purchasing to encourage purchases.

Another concern is BNPL financing might be confusing for some consumers who aren’t as familiar with technology and prefer a more traditional buying experience. To avoid any confusion or concern, make sure you proactively educate consumers with on-site messaging to make them more comfortable using new payment methods.

Buy now pay later isn’t for everyone, and you should carefully weigh the pros and cons before investing. However, by implementing the right payment methods and setting up responsible terms, retailers can both improve metrics such as conversion rate and AOV, as well as improving the customer experience. Creating this seamless ecommerce journey is a win for every party involved – including you.

About the Author:

Eric Christensen is Chief Payments Officer at Digital River, a completely integrated solution for all the back-office functions of ecommerce. Digital River enables businesses to sell across the world with a single connection to the platform of your choice.

Continue Reading

Why pay for news and opinions when you can get them for free?

       Subscribe for free now!

By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Posts