Five Winning Retailer Strategies for Buy Now Pay Later

Apple launches its own BNPL product – a harbinger?

So what does this mean for retailers considering whether or not to go ahead with BNPL? Apple recently announced the launch of its own brand no interest/no BNPL product fees. This decision represents a very bold move by Apple to achieve its goal of providing the best possible customer experience.

Following Apple’s lead, other companies are likely to reduce their reliance on external vendors to create their own custom integrated financing alternative.

Business Chief interviews two Fintech experts Leon Gauhmandirector of strategy and co-founder of the consulting firm in digital transformation Somewhere else and Alessandro Hatami, Managing Director of Strategic Consulting Pacemakerson winning strategies retailers can adopt.

Say no to one size

“BNPL is very attractive to consumers and merchants because it offers a frictionless and seemingly affordable payment option,” says Elsewhen’s Leon Gauhman. “To differentiate themselves in a crowded marketplace, retailers must seek to develop a seamlessly integrated financing offering tailored to their specific brand values ​​and customer needs. For instance, Hamburg Football Club (HSV) partners with ComDirect Bank to offer fans a current account including credit and debit cards, a “payment” wristband and various promotions and discounts such as TV subscriptions to watch matches.

Deploy brand equity to simplify customer financial needs

“His current issues aside, Klarna has developed an ambitious brand without payment, which is a tedious but necessary task,” says Alessandro Hatami of Pacemaker. “Retailers can reverse engineer this approach. Imagine doing business with Zara or Dior, and not just buying products from them. “It’s critical to understand your customers’ financial needs in the context of your brand,” adds Gauhman. “As part of their experience of your brand, do customers need to insure, borrow, save or pay? Could your brand help streamline these tasks? »

Outside of retail, brands are already adopting this approach: Mercedes, for example, has a “Fuel & Pay” payment platform which allows drivers to purchase and pay for fuel through a Mercedes app or through their vehicle’s infotainment system. Moreover, mmost US airlines offer forms of BNPL and in the EU Lufthansa and FAUCET already do. “These brands simplify things for the customer, allowing them to enjoy what the brand allows them to do – whether it’s driving or flying,” says Hatami.

Ensure integrated finance reflects your brand values ​​and purpose

Beyond regulatory issues and cheap credit issues, Gauhman believes the risk for retailers that rely on payment providers like Klarna is that BNPL brands are likely to focus on goals that might not. be in sync with brand-based customer needs. “Ethical brands can foster goals like longer-term loyalty or a more measured attitude toward consumption that embraces ESG values,” he says. “Take Patagonia which currently devotes 10% of its profits to small-scale environmental campaigns. It could apply a similar mindset to how it structures any integrated financing offering to customers. Cashback, discounts or slightly reduced interest rates for ethical purchases are all tools that e-commerce platforms or merchants could deploy.

Embrace the next generation power of technology

In the UK, Tesco and Sainsbury’s were retail pioneers in finance, but Hatami believes their offerings are outdated. “Today, a myriad of fintechs offer agile and composable solutions like Banking As A Service (BaaS),” he says. “These solutions allow brands to easily and affordably launch more innovative and inspiring integrated financial products. For instance, Walmart recently launched a fintech startup with investment firm Ribbit Capitalwith the ultimate goal of developing financial “experiences” for its employees and customers. Ikea’s parent company, Inkga, meanwhile recently took a stake in BNPL Jifiti. Coupled with Ingka/Ikea’s previous investment in Ikano Bank, the company is now well positioned to provide “competitive and accessible financial services” to customers.”

Integrate finance into your customer experience

Whichever integrated financing option brands decide to adopt, Hatami and Gauhman emphasize that ensuring a top-notch customer experience is key. “Carpooling apps like Uber and Lyft are great examples of what ‘good’ looks like in terms of customer experience around integrated finance,” says Gauhman. “These brands make paying for journeys simple and transparent, but they also offer financial services to their drivers (eg. Lyft debit card and bank account).” Hatami thinks the potential for integrated finance goes far beyond BNPL in areas such as credit/debit cards and mortgages – perhaps even pensions. “Travel industry brands, including AirbnbRyanair and Trainline have all realized that travel insurance is an easy sell when someone is at the point of sale – but there are many retailer scenarios where this logic can be applied.

A win-win plan

Embracing integrated finance requires careful thought about engaging with customers and communities in ways that go beyond simple financial transactions. That said, Hatami says retailers looking to get going shouldn’t delay. “Recent search from BaaS provider Vodeno revealed that 34% of retailers plan to increase their in-app financing offering over the next 12 months, while 22% aim to dip their toes in the water for the first time. There is therefore a real risk of being overwhelmed by rivals”.

Done right, Gauhman argues that integrated finance should fit intuitively into brands’ existing playbooks on customer loyalty and engagement. “The big opportunity is to make integrated payments/loans/insurance part of a truly customer-centric experience,” he says. “In the process, retailers can distance themselves from criticism over consumer debt that could be amplified by the cost of living crisis.” In other words – beyond the glamor and buzz of BNPL – personal financing could be a powerful way forward, lurking in plain sight.

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