" class="no-js "lang="en-US"> Buy Now Pay Later: Customers left confused with too many options
Wednesday, February 01, 2023
Saltedge Report

Buy, Buy, Buy Now Pay Later: Customers left confused with too many options at checkout

Consumer behaviour at the point of sale is constantly shifting. To meet this demand, the number of choices available has grown exponentially. We are now at a stage where checkout experience is seen as a competitive differentiator among retailers. This in turn has fuelled bigger, better, faster solutions.

In isolation, this is a great thing. Especially in the realm of technology. New developments mean customers are getting everything they need and want within a few clicks. However, in the retail finance space, we have reached a point where the amount of choice available is simply too much and risks become detrimental to customer experience.

It’s clearer to picture it as a bell curve on a graph. As the amount of choice has increased – and all the benefits that choice brings – customer satisfaction has increased. But it’s reached a peak. In many different industries, this overwhelming amount of choice has caused customer satisfaction to now start to slope back down.

The flagship of the retail finance sector, Buy Now Pay Later (BNPL), is now starting to become overcrowded – and it is retailers that are feeling the effects. The FCA’s Woolard Review expressed concern over this, stating how customers are given ‘a long list of indistinguishable options.’

There are several issues to consider here, but fortunately there are simple solutions that allow retailers to provide that optimum level of choice at the point of sale without leaving customers feeling dazed and confused.

Too much of the same thing

The biggest problem with the amount of BNPL choices now provided at the point of sale is that there seems to be little information on how they differ. A Which? study found that there’s usually little detail on credit checks, late fees or even a basic breakdown of how repayments work for each service, despite 62% of retailers offering BNPL and 70% of them offering more than one scheme.

This lack of differentiation makes it hard to decide which to pick and there’s a strong argument that there’s too much of the same thing. There’s a common misconception that BNPL is the only form of retail finance. This is not the case. Instead of offering three or four BNPL services without clarifying how they differ, it would make more sense to offer several retail finance options such as interest-free credit, eCommerce finance and a revolving credit facility, as well as BNPL. These are truly differentiated services that meet consumer demands for choice and control.

No consistency within the customer journey

Online shopping and ‘checking out’ has in recent years become somewhat standardised. Every checkout appears familiar, all the buttons and fields you have to go through aren’t unrecognisable. But when it comes to BNPL, each retailer is different depending on the options provided, with some options taking customers to a different page and others requiring an account to be set up with the BNPL provider.

The inconsistency in each customer journey only goes to add to the confusion, and a simpler approach would be for retailers to offer a whitelabel retail finance option which allows them to retain control of the customer journey. It also means customers aren’t forced to jump through hoops just to use the service.

Standardisation pending

Obviously, the issue of too much choice isn’t something that clouds customer experiences in all fields. It could be argued that the issues within the BNPL space are due to how new it is. It’s gone from a $1.2 trillion market to a predicted $2.5 trillion market this year and its growth isn’t slowing anytime soon. This rapid expansion means there hasn’t been enough time to work out any of the issues.

While BNPL finds its feet and we wait for the dust to settle, it’s unsurprising that issues such as these occur. It’s exactly why the Woolard Review was commissioned and why the expected regulation will help to put a more standardised process in place. But that doesn’t stop retailers from creating doing damage to their brand in the interim.

The answer to retailers

Retailers must look to provide the optimum amount of choice without bombarding customers with options.

Fortunately, there are already solutions out there for retailers that address this problem, but the disruptive BNPL providers that have blazed a trail in this unregulated market certainly won’t be shouting about them.

With the recent findings by Which? that this is leaving a bitter taste in customers’ mouths, and the Woolard Review exposing the main BNPL players for their lack of regulation or credibility, now is the time to partner with traditional lenders and whitelabel BNPL providers in order to save face and still offer the in-demand BNPL service.

While traditional banks will still face any regulation introduced to retail finance, they’re well versed in such matters. While the likes of Klarna, Clearpay and Laybuy try to find their feet and will most likely face negative press off the back of their attempts, banks have the credibility and trustworthiness to avoid the fallout.

Also, by partnering with them through a tried and tested, whitelabel platform, the retailer retains control of its customer journey, providing its own BNPL options and any other retail finance provisions it sees fit, giving customers plenty of choices without bombarding them with exactly the same one.

While we wait for further regulation to be announced, retailers should seek to get such a system in place as soon as possible to avoid the so-called ‘Klarnage’ that is expected, as well as providing customers with a seamless experience at the point of sale.

By Neha Mittal, Interim CEO at Divido 

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