Power Retail’s first ‘Spotlight Series’ report has revealed that 1.8 million Australian consumers are actively using buy now, pay later services, representing a growth rate of 120 percent per annum.
Since the fledgling fintech sector caught its big break back in 2015, buy now, pay later (BNPL) services have been at the forefront of both retailers and consumers’ minds. Power Retail’s report on the sector has revealed some key insights into the industry and how it’s shifting the way consumers shop and pay for goods both online and in-store.
According to Grant Arnott, the managing director of Power Retail, retailers and consumers alike are starting to take note of BNPL services, which is making it a mainstay in the online retail industry.
“In a few years’ time it will no longer be an alternate payment option, it will simply be expected by consumers,” he says.
Mark Fletcher, the insights manager and author of the report agrees with this, saying he expects to see the Australian industry mimic international markets when it comes to the increasing adoption of BNPL services. “I think we will follow the example of Sweden”, he says, “where BNPL now accounts for 30 percent of all transactions”.
Fletcher’s research has revealed that BNPL has grown from 50,000 transactions per month in April 2016 to 1.9 million per month in June 2018. Of these purchases, the most common transactions are made weekly, with the total cost of each purchase ranging between $100 and $249. Shoppers who use BNPL services are also believed to buy more goods, shop more often, and express higher loyalty rates to retailers that offer the popular payment method.
Retailers also believe BNPL shoppers are more likely to make a purchase, claiming they’ve experienced an increase in conversions and a boost in sales since implementing the alternative payment method, with over 50 percent of the respondents saying they’ve seen this boost in traffic and revenue almost immediately.
“We took BNPL on to offer payment flexibility to our customers, to increase basket size and also as a new traffic source,” says Olivia Carr, the CEO of SHHH Silk. Showpo’s CEO, Jane Lu also says her customers have responded positively to the payment solution, “Most of our customers don’t have credit cards so this is a great way for them to manage their cash flow.”
Despite recent speculation over the future of the BNPL industry, with the launch of an inquiry into the sector, consumers seem to have remained loyal to companies like Afterpay, Openpay and Zip, with 67 percent of consumers still using their chosen service 12-months after their initial trial.
In fact, Arnott is confident that shoppers will continue to make the shift away from traditional payment methods towards BNPL solutions as consumer confidence in the big banks continues to decline.
“Due to the recent Royal Banking Commission, some consumers have felt a loss of trust in the banks and will, therefore, start using a new generation of financial services,” he says.
“Alongside this, with the growing impact of Amazon Australia, competition in the Australian e-commerce sector has never been so fierce, and thus, success will come to those who adapt.”
Power Retail’s Spotlight Series report, Buy Now, Pay Later, will be available for purchase from the Power Retail website from Thursday, December, 13.