" class="no-js "lang="en-US"> EXCLUSIVE: ‘Time to let Zip!’ – Anthony Drury, Zip in ‘The Fintech Magazine’ - Fintech Finance
Saturday, February 04, 2023
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EXCLUSIVE: ‘Time to let Zip!’ – Anthony Drury, Zip in ‘The Fintech Magazine’

If high street retailers want to find their place in an omnichannel world, they need BNPL at the point-of-sale, says Zip UK MD Anthony DruryAnthony Drury, Zip UK | Fintech Finance

E-commerce has been the key battleground for buy now, pay later (BNPL) providers ever since what’s thought to be the first split payment of its type was processed by a Swedish online bookseller in 2005. So, it’s little wonder that valuations of BNPL firms across the globe rocketed into the billions during a pandemic that saw high-double-digit growth in e-tail sales.

And yet, despite the dizzying number of toilet rolls and bread-making kits that have careered in vans down a street near you over the past 18 months, the majority of purchases worldwide are still made in a store. According to the Centre for Retail Research, combined online retail purchases across the UK, France, Germany, Spain, Italy and the Netherlands in 2021, for example, are forecast to be 15.3 per cent of total retail sales (down from 16.2 per cent) in 2020.

While many predicted the nail had been firmly hammered into the high street’s coffin, it looks like reports of its death were much exaggerated. The UK’s BDO High Street Sales Tracker, says total in-store, like-for-like high street sales rose by 54 per cent in July 2021 (albeit from a base of -39.4 per cent in July last year). Global research from Mood Media, published the same month, which surveyed more than 8,000 consumers from the US, the UK, France and China, also indicated that 80 per cent of shoppers now feel comfortable visiting physical retail stores again and 60 per cent expect to return to their old shopping habits by the end of the year. Only nine per cent, globally, said their shopping habits won’t return to normal.

As with any resurrection, though, things don’t look quite the same, second time around. As the high street climbs out of the bunker, shoppers who have become used to enjoying endless choice of seamless payment experiences online, now expect the same when standing at a checkout. It’s why Australia-founded BNPL player Zip’s managing director in the UK, Anthony Drury, predicts: “As the high street opens up, that’s where the interest [in BNPL] is going to start to bubble up, particularly in this part of the world.”

Zip is on a mission of global expansion. Founded in Oz in 2013, with the aim of disrupting the credit card market, it now operates in 12 countries, including the UK and the US, and has about seven million customers. There are new markets in Europe, the Middle East and Asia in its cross hairs as it embarks on a programme of aggressive growth in the face of intense competition for a slice of a BNPL pie that’s estimated to swell to US$1trillion in transactions by 2025. This year, it converted its minority stake into full control of UAE-based market leader Spotii and is currently in the process of acquiring European BNPL provider Twisto Payments. It has also has just teamed up with the omnichannel payments platform Trust as part of a strategy to straddle in-person and remote shopping in all the markets it operates in. The partnership with Trust Payments enables the sizeable network of retailers that already use Trust’s platform to offer Zip’s pay-over-time options at point of sale – wherever that might be.

This is facilitated by Zip’s newly introduced Tap & Zip virtual payments card, borrowing a format that consumers are now well used to from their standard credit providers – except, of course, Zip doesn’t charge any interest and using it doesn’t impact an individual’s credit score. Finding ways to target as many merchants as possible, as cost-effectively as possible, is key to building this ‘two-sided network’ , made up of consumers on the one hand and retailers on the other. It’s ina retailer’s interests to be part of it, because, as independent comparison platform, finder.com, found, whether or not a retailer offers BNPL at checkout is a deciding factor in where consumers choose to spend.

It revealed this year that 37 per cent of Brits had used a BNPL service (a rate of adoption only equalled by Australia), and 9.5 million of them said that they avoided buying from retailers that don’t offer the option to spread payments. Meanwhile, recent Macquarie research from the States suggested that consumers were more than happy to sign up with a different BNPL provider to the one they normally used, if that was offered by a retailer, rather than switch merchant. No wonder BNPL firms are so keen to plant their flag as wide as possible.

“From the merchant perspective, they get the benefits of increased basket size, flexibility and access to different consumers they haven’t reached before, along with the ability to market to those consumers through a range of digital channels,” says Drury. “On the customer side, we’re providing interest-free, flexible finance for, in most cases, low-value ticket items. So, you start to get the benefit of both the customer and the merchant flowing through on this two-sided network.”

Zip’s own research, he says, shows that consumers want flexibility, ease of use and the ability to use a product anywhere, in a controlled fashion, at a time when, for many, there is a lack of desire to own a credit card due to high interest rates. Flexibility is king. It’s why Zip’s Tap & Zip digital payment card can be used at any terminal that accepts Visa or Mastercard. Afterpay, Zip’s biggest home-grown rival in Australia, has adopted a similar strategy with its virtual card. And, as the Millennials who first took advantage of BNPL back in the Noughties grow older and want to purchase bigger ticket items, Zip has also adapted to spread transactions over longer periods (up to 36 months).

“Ultimately, we are allowing the consumer to spend where they like, because Zip is now available omnichannel. So, merchants can have integrations online over existing payment infrastructure, without the need to do deep integrations and add additional tender types, which just increase the complexity for most merchants.

“That flexibility to go everywhere now is the new normal – and the next frontier for buy now, pay later. That’s one of the things I’m pretty pleased we’re leading globally.”

As COVID-19 restrictions ease and shoppers start to return in their droves to high streets, BNPL providers are in a frantic race to align themselves with major retailers. While Zip struck a partnership with Trust Payments, rival Afterpay chose to target Westfield shopping centres to onboard their retailers. Whatever the distribution model, the use of data is central to providing merchants with opportunities to prosper.

“It opens up marketing channels that drive more interest in BNPL,” he says. “We are starting to see what I call the convergence between loyalty, rewards and payments – we’re starting to connect these applications together and use personalisation, for example, to drive consumers to think of certain things at certain times.

“Facebook and Google are obviously madly working the data sets behind the scenes, to provide certain content to us. That personalisation can be taken a lot further when you start to tackle it with a payment facility in the background, as well. We have products that bring that together, so you can build closed-loop ecosystems, or open-loop ecosystems, where you can take your loyalty platform and connect payments to it, with or without a range of BNPL instalment facilities.

“So, there’s a bit of a wave of interest here, particularly among the larger retailers, looking at how they can connect those loyalty platforms into the payment ecosystem more effectively.”

As for the future of the BNPL marketplace, some experts forecast a consolidation of the industry as mainstream financial services move in, potentially offering sweeter deals for retailers. The natural response for Zip
and some of its competitors, says Drury, is to move into their space and provide broader financial services.

“You’ll have seen some of our competitors talking about becoming more like neobanks,” he says. “Over time, I agree [with that strategy]. Depending on scale, depth, and breadth, you will start to see some vendors move into other parts of the financial services ecosystem.

“But right now, for us, it’s about expanding our global reach, seeking more merchant partnerships, opening up those merchants to consumers across borders, and driving higher-ticket products, all
with the product flexibility in the app for consumers to manage their finances in a responsible way.”


 

This article was published in The Fintech Magazine #21, Page 72-73

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