June 28, 2019
UK ‘Buy Now Pay Later’ market sky rocketing
Leading Australian ‘buy now, pay later’ business AfterPay has officially launched in the UK under the ClearPay brand. The business, which is responsible for a staggering 10% of all ecommerce sales in its home market in Australia, has launched with some big UK names, including JD Sports, BooHoo, Urban Outfitters and Smiggle.
This is a market that has boomed in the last couple of years with Swedish giant Klarna leading the charge in the UK. Klarna’s global revenues increased last year by 31% in 2018 to £445m. In the UK Klarna now claims 4.4million active users.
The benefits to all parties are clear. For consumers the payment technologies, that typically allow them to spread costs typically over four interest free instalments offer a tempting way of seemingly increasing spending power and meet the increasing desire for instant gratification.
For retailers the benefits are four-fold:
- Greater purchase frequency: Klarna estimates that its technology increases purchase frequency by 20%
- Greater basket value: Carl Scheible of Clearpay claims the introduction of their technology typically results in a 20-30% increase in basket size
- Customer acquisition: Co-founder of New Zealand buy now pay later firm LayBuy estimates that retailers who introduce their technology experience a 30% increase in new customer acquisitions
- Reduction in returns: AfterPay and Klarna both claim the service can drive down returns rates by around 20% by preventing ‘shoppers remorse’
What’s interesting from our side is the number of similarities between payment options and delivery options. Each of the above benefits could equally apply to click and collect, or PUDO. And at the same time, payment options and delivery options are both causing a challenge to retailers – what options do I offer to my customers?
Go to the checkout of Boohoo.com, for instance, and you’re now faced with three home delivery options, six click & collect fulfilment options and 10 payment methods including Visa, Mastercard, PayPal, Apple Pay and ClearPay.
At what point does offering consumer choice cannibalise the simultaneous need to offer customers simple convenience? And how will payment options and delivery options evolve? We believe there’ll be more consolidation and collaboration to give the customer of the future the stress free, seamless experience they expect.