Written By: Zip, Previously Quadpay
Buy now, pay later (BNPL) has consistently been picking up steam for the past decade. Then, COVID-19 happened — and like so much else in the world of e-commerce, BNPL graduated from a passing trend to a permanent consumer preference.
The flexible payment solution works like this: At checkout, customers opt to pay over time with a BNPL provider. This splits the total cost of their purchase into a handful of payments (usually, four to six) over a period of several weeks or months. They pay the first payment at checkout, hit “Pay Now,” and their order is submitted.
While the customer only pays the initial installment upfront, the BNPL provider covers the remainder of their purchase, so the merchant is made whole immediately. The merchant then processes and ships the order like any other.
For shoppers, BNPL offers the flexibility of being able to spread out the cost of a purchase, while receiving it just as soon as if they had paid entirely upfront. For merchants, it offers even more benefits — like the ability to bring in new customers, more purchases, and higher Average Order Value (AOV) — but without any of the risk.
What’s not to love, right? And that’s just the beginning. Read on to learn more about the sizable benefits BNPL can offer your e-commerce store.
BNPL has slowly but surely been eating up market share for years. Since the pandemic, BNPL growth has skyrocketed. The benefits below explain why.
There is an overall shift among today’s consumers away from traditional credit toward alternative payment solutions.
In a recent survey that asked millennials, “What does financial success mean to you?,” 60% responded “being debt-free.” Younger shoppers, including millennials and Gen Z, are increasingly wary of credit cards and their potential to rack up debt. The average age of a credit card holder is now around 50.
Instead, these shoppers prefer flexible payment options like BNPL. In fact, BNPL’s versatility is one of its main selling points to shoppers of all ages, with 44% of shoppers choosing it precisely because it offers more flexibility than credit cards.
As these shoppers age into representing a larger share of the consumer pie, millennials and Gen Z are driving major changes across retail. But it’s not just younger shoppers adopting BNPL — their parents and older friends are, too. Nearly one in four Gen X shoppers uses BNPL to avoid using credit cards. Among boomers, BNPL usage doubled over the past year, with 40% now having used the service.
With flexibility and debt wariness driving shoppers, BNPL is the clear solution for retailers looking to stay competitive in a changing retail environment.
Speaking of change, today’s consumers demand convenience. It is not enough that retailers offer what they’re looking for in a shopping experience — they have to make it easy, too. A third of BNPL shoppers said they would have abandoned their cart entirely if BNPL wasn’t an option at checkout.
Credit cards have terms that are confusing to understand, with surprise fees and and interest rates that are subject to change. Shoppers increasingly view them with hesitancy and a wary eye.
BNPL services, on the other hand, are straightforward and easy to understand. Shoppers pay for their purchases in four equal, interest-free installments over a period of several weeks, with no hard credit check. In other words, BNPL offers the convenience that customers demand.
The future is omnichannel. Retail TouchPoints reports 90% of retailers expect to offer Buy Online/Pickup In-Store (BOPIS) by the end of this year, and 87% plan to support mobile point-of-sale (POS) devices. According to Retail Dive, online digital wallet use rose to 35% last year, and nearly doubled for in-store shoppers.
These trends tell us that the choice of checkout is no longer twofold. In addition to the traditional online and in-store options, today’s consumers expect to check out on your website, at your store, from their car, and through your Instagram shop. Retailers need a solution that flexes seamlessly between these solutions. That’s BNPL.
Many BNPL services are set up to support omnichannel commerce. For example, Zip doesn’t require any additional code changes or integrations with a POS. Shoppers can simply scan a QR code to download the app, and check out using a credit card or their preferred digital wallet.
BNPL does a lot to move the checkout experience into the future, from the convenience it offers shoppers to the omnichannel support it affords retailers. How do all those benefits translate to ROI? Very well, according to the data.
BNPL positively impacts both e-commerce conversions and AOV. The average Zip partner merchant enjoys a 20% lift in conversion and topline sales and a 60% increase in AOV. In a holiday report from CNBC, half of shoppers (48%) said BNPL enables them to spend 10% to 20% more than they can using a credit card alone. In a survey by Forbes, that number was as high as 40%.
Because BNPL enables shoppers to pay in multiple installments over time, they can budget their purchases accordingly. Despite a common misconception, the majority of BNPL shoppers actually have enough funds in their bank account at the time of purchase to cover the full cost, with roughly half having five times more than the total purchase price at their disposal.
BNPL shoppers choose to use BNPL for a variety of reasons: They want to be responsible with their finances. They like the convenience. Or, like nearly 30% of Americans, they may not have a credit card.
Further, because the payments are split into smaller installments, the overall cost seems more manageable. This may make shoppers more receptive to add-ons and upsells at checkout, further increasing AOV for e-commerce stores.
While increased conversion is compelling enough on its own, the benefits of BNPL don’t stop there. Research shows that implementing BNPL also increases customer loyalty and repeat purchases. Zip partner merchants report an average 80% increase in repeat customer rate.
One in three BNPL shoppers uses it at least once a month, with 17% using it once a week or more. The convenience, flexibility, and transparency of BNPL fosters loyalty — both to the service itself and to the brands that offer it.
We don’t have to tell you that repeat customers are extremely valuable to any retail business. This cohort has a significantly higher likelihood of converting, drives up to three times higher AOV than first-time purchasers, and buys a lot more often. BNPL can be a useful tool in retaining these high-value shoppers.
Let’s end by looking at a real-world example of BNPL in action. MuteSix and Zip recently partnered together to see how BNPL messaging could boost conversions for footwear retailer Snibbs.
We started with Snibbs’ Welcome email campaign. Prior to the partnership, these emails had a healthy 3.5% to 4% POR. POR stands for Placed Order Rate, or the percentage of new subscribers who placed an order within the first seven days. When MuteSix added Zip messaging to the email, the POR increased by 2.7% within just 30 days, for an overall POR of 6.5%!
Given the success of the Welcome emails, MuteSix added Zip messaging to Snibbs’ Abandoned Cart email campaign, to see if it had any effect on reducing buyer friction — and it did. After adding Zip messaging, the POR for these email campaigns increased by 2.5%.
Placing Zip messaging front and center in emails has lifted POR across the brand’s email marketing campaigns. The creative that performed best highlights the actual monthly payment amount customers will pay with Zip.
This approach has clearly resonated with Snibbs’ customer base. “We did a deep dive on customer data to understand their motivations, pain points, and spending habits. We found that many of our customers are living paycheck to paycheck, so $135 is more than they’re comfortable spending,” shared Daniel Shemtob, Co-Founder & CEO of Snibbs. “Allowing them to break the cost up, at no extra cost and with no credit check, makes this life-changing purchase more palatable.”
Bringing attention to the major pain point Zip solves (being able to pay in installments) was a game-changer. Here’s what MuteSix found to be the winning messaging: “Waiting for payday? Why wait? Bring home better work days starting at just $32/mo. with Zip.”
Based on these results, MuteSix is finding new opportunities to incorporate Zip messaging across the Snibbs website. Check out this recap of Zip’s recent panel featuring Snibbs to learn what BNPL can do for you.
While the Snibbs use case is certainly impressive, the benefits of buy now, pay later extend far beyond traditional fashion retail. Adding a BNPL solution to your e-commerce checkout can yield incredible results for merchants across virtually every industry.
Learn more about how Zip’s flexible payment platform boosts sales, AOV, and conversion for partner merchants here. And if you’re looking to leverage the most compelling advertising strategies to achieve record-breaking results using BNPL, reach out to the DTC marketing experts at MuteSix today!