Increased average cart and conversion rates explain why the BNPL technique can be a winner in the shopping environment. In conversation with Simone Mancini, CEO and founder of Scalapay.
BNPL: what is it?
Almost ten years ago, the phenomenon of buy now pay later emerged. The platforms created, provide the possibility of deferring payment for the purchase of goods, even at low prices, in several installments without charging additional interest to the customer. Even before the advent of the pandemic, this mode of payment was more widespread in countries such as America and Australia. According to Forbes, this practice doubled in America and has increased among Generation Z, from six percent in 2019 to thirty-six percent in 2021. The rate has been increasing among other generations as well but with a lower rise.
The growth in the sector is also understandable by looking at the engagement and data that major companies are achieving. Amazon, for example, has partnered with Affirm, allowing those who spend more than fifty dollars to pay in monthly installments without interest. PayPal, with such a service already in place, will not charge late fees on BNPL payments, while Apple is developing a way to make Apple Pay also a buy now, pay later service. Simone Mancini, is the CEO and founder of Scalapay, a payment solution provider that allows customers to buy and pay in three installments without any additional interests.
He explains how working in the online buying sector, they experienced the difficulty of the merchants to develop technical features in the online selling. The idea of their application was born with the aim to help the merchants to technically develop the platforms, in particular the payment section. The reflection started in Australia, where Mancini lived in 2018 and where deferred payments were collecting a certain success. The development of the Scalapay application started from a need of the merchants, rather than with the customer in mind. It acts on the most frustrating moment of the buying process, the payment, offering a way to cushion the impact of the expense.
Technology development and customer interface
Mancini explains how Scalapay is inserted as a payment system within the service’s website, and then by the merchant who decides to use it. There are different e-commerce platforms with which the technology is compatible such as woocommerce, prestashop, magento and others. The integration allows the app, like Scalapay, to be activated on the product page, cart and at check-out, making it visible to the customer. When the users selects the method of payment at check-out, they are redirected to the Scalapay or another BNPL app or website to register their information. If the customers are using the service for the first time, they are asked to enter their phone number, first name, last name and social security number, along with their card information.
If users are already registered in the system, they are redirected to the confirmation page because the technology keeps the session active for three months from the date of activation and use. Another type of interface that the customer can find and use is the downloadable app, which allows the customer to shop with this system in-store as well. By generating a barcode through the app within a physical store, he or she can subsequently pay at the cash register by scanning said barcode which allows the payment to be deferred. Through the site of Scalapay technology however, it is not possible to buy because it does not work as an e-commerce. It is only possible to buy through the partners who use the system.
Comparison of different BNPL apps
In the same way and with the same purpose, many BNPL services have been created and more traditional services have been updated, as with the case of Paypal or Amazon mentioned above. Among the platforms created with this function are Klarna, Clearpay and Afterpay. At the core of each system, which is in effect based on a financial model, is the ability to pay in installments without interest. This is made possible by the inclusion of a maximum of three months to complete the payment, a timeframe within which, even for other types of financing, there is no inclusion of interest rates for the client.
Although payment in installments has always existed, the recent growth of this type of payment is due to the difference from other payment methods such as credit cards, which earn fees from the customer, according to Mancini. BNPL, on the other hand, makes it possible to work through e-commerce by including a feature that increases sales and allows the merchant to cover expenses. In general, these applications require that the user is of legal age and use a credit card. They rely on the website of the brand using it, while some need the downloaded app for subscriptions and installment notifications. The first installment is paid by the customer at the time of order, while the other two are often distributed after thirty and sixty days.
Changes in the customer experience
This method of payment generates a difference in consumer behavior. The customer is no longer faced with the unpleasant step of calculating the total amount in their cart. They have the possibility of having a positive consumer journey and increase the chances of spending, even if momentarily they do not meet the required amount. What becomes critical through buy now pay later is the ability to balance risk between buyers and sellers. Installment plans are not always appreciated by the client, not least because of the interest rates.
Scalapay deals with this by creating magic, as the claim of the company affirms. The team works based on always being able to surprise or to make the experience for the customer very pleasant, continues Mancini: «We have an NPS, Net Promoter Score of 90.3, the highest of any BNPL and numbers that are generally not common in the finance industry». Through this technique, the customer does not perceive the application as a credit or loan instrument, the customer does not pay interest for this deferment.
It is the merchant who maintains the costs by paying a fee to the platform that offers this payment system. The merchant is enticed to use the BNPL system because they notice an increase in average receipt and conversion at check-out, explains Mancini. Another means of economic support for platforms like Scalapay is the awareness it creates with respect to the brands that use it, redirecting them to their websites and increasing their traffic. The customers’ target that uses this methodology the most, according to the data provided by Scalapay, is related for the sixty, almost seventy, percent of women, aging from eighteen to fifty years old.
Data from user sectors
The sectors most involved in using this system, compared to Scalapay’s experience, are those that deal with pleasant purchases, explains the CEO. This means clothing, cosmetics, household products, children’s products, sports, wellness and travel. Analysis on brands in these industries, using BNPL Scalapay technology, allowed the company to be able to analyze consumption data and customer behaviors. Relevant numbers include the increase in the average cart of forty-eight percent using this payment method, due to an increase in customer buying power through the use of installments, going beyond the customer’s established budget idea.
Also significant is the conversion increase figure of eleven percent, Mancini explains. This increase is because, when it comes to the cart, which is one of the points at check-out where users abandon the customer journey, one of the biggest obstacles is the price, which represents the limit between what the customer wants and what he or she can have. Paying in installments alleviates this aspect and concern for the customer. The most successful sectors in the use of Scalapay are fashion and luxury, despite the fact that merchants in these areas thought that their target audience was not interested in accrual. It can be seen that for brands using it, fifty percent of purchases are made through this application.
Lampoon reporting: the growing use of BNPL
It should be noted that the introduction of the ‘buy now, pay later’ payment method is redefining the purchasing environment by imposing a valid alternative model to the traditional payment at the end of the customer journey. At the base, there is the simplification with respect to the problem of wanting to buy something that at that moment is difficult to obtain, probably for lack of economic resources. «The negative impact that paying for that service or item has on the monthly budget inevitably changes the buying experience», Mancini reaffirms.
With deferral payments, the clients are encouraged to buy from brands in line with their values that they could not otherwise afford. Through the buy now, pay later mode, it also develops a certain level of customer loyalty to the brand. As per Scalapay’s data, there is a sixty percent increase in the chance of purchase when a customer who buys through installments once, makes another purchase with the same merchant later. Loyalty levels increase also towards the BNPL service.
Some criticism has been made regarding the issue of customer privacy when it comes to BNPL applications that can access various customer information, including individual consumption habits. In practice, this speaks of the future creation of tailor-made proposals to be offered to the customer, designed through the data collected by the applications and brand sponsors. On this aspect, Mancini specifies that these financial platforms, or at least Scalapay, do not sell or pass information regarding customers to the brands that use them, except for those that allow the merchant to register the customer to make the purchase faster in the future.
Scalapay is an innovative payment method that allows customers to buy from online and physical stores, receive the products immediately and pay in 3 convenient equal installments with a monthly deadline. The service has no additional charges for the customer if installments are paid by the due date. At the time of purchase, the first instalment will be charged immediately (equal to one third of the purchase total value). The next 2 installments will be charged monthly. Scalapay immediately pays the seller the full amount of the order and takes all risks of fraud and non-payment.