BNPL: Who Else Pays Later? You?

You likely are aware of buy-now, pay-later (BNPL) programs, from Afterpay, Affirm, and Klarna, among others. It gained a foothold in online retail – "the hottest trend in e-commerce"– and has been especially popular in the UK and Australia. Now it's availability to many more retailers may be acceleratedwith the proposed acquisition by Square of Afterpay. It is a trend we all need to watch carefully.

Here's the deal. Once again, the retailer is the pickle in the middle. The benefits of increasing sales (and average transaction value) which are very attractive, must be weighed against the potential increases in hassle factors, particularly for your most valuable asset: your front line staff. 

Let's quickly review this program. Touted to merchants as a way to increase sales and/or to reduce the need for promotional events, BNPL allows consumers to choose either split payments – four interest-free payments over six weeks – or for larger purchases, installment loans of six to 48 months. Depending on how the merchant funds the program, the installment loans may or may not charge interest to the consumer. 

Early results suggest that some merchants enjoy significant improvements in sales.  As Alexis Leondis observed in Bloomberg Opinion,* 

• "Studies show buy-now, pay-later often induces people to spend more. Two-thirds of shoppers said they bought more thanks to buy-now, pay-later, and almost half said they wouldn't have made the purchase if that hadn’t been an option, according to a recent survey by LendingTree."
  
  
• It also is especially popular among Millennials, who prefer to not use credit cards. 

However, consumers with buyers remorse – whether unhappy with the merchandise, or unable to keep up with the payments – can lead to an increase in returns. As Leondis noted, 

• "Complaints to the Better Business Bureau and the Consumer Financial Protection Bureau show there are disgruntled customers who tried to make a return and had difficulties getting full refunds, especially if the store issued a credit."

Be Prepared for Increased Returns
So, before you eagerly jump into a BNPL program, check out your return policies. Time for an update?

• Do you offer refunds? In-store credit? In full? Is there a time limit? Must the customer have the receipt? 
  
  
• And, how do you make these policies known? Are they in writing? Posted? Straightforward? Or buried in the equivalent of "the fine print?"

​Most important, remember who has to enforce these policies, and bear the brunt of the consumer's ire? Yes, your front line staff. 

Many of them may already have gone through the ordeal of dealing with customers on mask requirements during Covid. And now, given the delta variant of Covid, those tensions are not going away.

Are you able to properly train them about the BNPL policies, and more important, train them on dealing with disgruntled customers seeking to return items?

So, to enjoy the allure of increasing sales and attracting Millennials, best that you lay a strong foundation of clear return policies and support for your staff.  

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* Millennials Should Beware of Rising Payments Apps, Alexis Leondis, Bloomberg Opinion, August 5, 2021