Experts Opinion – Buy Now, Pay Later, Is It Good or Bad for Black Friday?

Black Friday 2021 will fall on November 26th, where customers have the opportunity to take advantage of deals across the majority of retailers. With the increase in sales which takes place during the run up to Christmas, there is also an increase in customers choosing the Buy Now, Pay Later option at the checkout.

Buy Now, Pay Later applications such as Klarna and ClearPay have increased in popularity in recent years, providing customers with the option to pay for their purchases in monthly instalments. With 10 million people across the United Kingdom having used Buy Now, Pay Later schemes between Black Friday 2019 and 2020, it appears likely that there will also be an increase in usage between 2020 and 2021.

 

Our experts include:

  • Dean Benson, CEO of Visualsoft
  • Wizz Selvey, CEO & Founder of Wizz&Co Consultancy
  • Elin Helander, CSO of Dreams
  • Christer Holloman, Fintech Entrepeneur, Author & Public Speaker
  • Neha Mittal, Interim CEO of Divido
  • Samantha Fogerty, Managing Director of Payl8r
  • Josh Partridge, Managing Director UK & Co-Head of EMEA of Yahoo
  • Richard Sherlock, DPO of PaydayLoansNet
  • Tony Craddock, Director General of The Payments Association
  • Nikhita Hyett, Managing Director of BlueSnap

 

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Dean Benson, CEO of Visualsoft

Dean Benson

“We have seen an increase in usage of BNPL across all demographics over the last 18 months so it will be extremely important during this years BFCM. With consumers looking to take advantage of short term discounts and special offers, having the ability to spread the cost of these over a period of 3 months or deferring the payment to the following salary cycle is extremely appealing to most consumers. We have seen brands utilising the audience that companies such as Klarna and Paypal have in order to drive new customer acquisition which is a key driver for promotions during this period.”

 

 

Wizz Selvey, CEO & Founder of WIZZ&CO Consultancy

Wizz Selvey

“Many brands are integrating Buy Now, Pay Later which is advantageous as the more options given to customers by reliable payment providers, the more likely a customer is to purchase.

The ideal customer journey is to be as frictionless as possible. Therefore, embedding alternative payment providers at checkout, for which customers already have accounts, will likely result in higher conversion.

These options can be beneficial for both brands and customers particularly for peak trading periods such as Black Friday and the run up to Christmas.”

 

Elin Helander, CSO of Dreams

Elin Dreams

“While successfully capitalising on this ‘loss aversion’ and ‘present bias’, these schemes also often use aggressive marketing tactics to make them as desirable and appealing as possible and lure young consumers into taking out loans and paying later.

A worrying consequence of the growth of the BNPL trend is that we now live in a society in which consumers are constantly being hit around the head with this idea that paying later for something – which in essence means borrowing money – is fine. As a cognitive scientist, I am intrinsically aware of the dangers of borrowing money and how it is linked to low financial wellbeing and financial anxiety. And having a whole generation with low financial wellbeing is no longer an individual problem, it’s a societal one.”

 

Christer Holloman, Fintech Entrepreneur, Author & Public Speaker

Christer Holloman

“Consumers are increasingly adopting retail finance options like Buy Now Pay Later (BNPL) at the point of sale. They’ve almost come to expect it as a payment option. As such, it is being seen more as a hygiene factor for retailers looking to convert customers at checkout than anything else.

When you throw Black Friday into the mix, a day (or more commonly, a week nowadays) known for its discounts on high value items such as TVs and laptops, retailers can no longer afford not to have a BNPL option in place. Trying to offer Black Friday discounts without retail finance is going to prove really uncompetitive.

But all of this shouldn’t detract from the need to protect consumers. While offering BNPL options on Black Friday is important, it’s also crucial that retailers partner with reputable lenders. In doing so, they can protect their customers around the festive season, known for encouraging habits of discernible overspending. By choosing the right partner for their BNPL solution, consumers will be better protected as we head into this busy period for the retail industry.”

 

Neha Mittal, Interim CEO of Divido

Neha Mittal

“There’s a parallel that can be drawn between Buy Now Pay Later (BNPL) and Black Friday; both are great solutions when used responsibly. As retailers look to combine the two this festive season, consumers should consider the options available to them before potentially overspending on the big discount holiday.

Ahead of regulations being introduced to the BNPL space, Black Friday presents a great opportunity to reflect on the long-term impact irresponsible lending can have on the consumer. Whilst greater value can be achieved through both BNPL and Black Friday, the very real potential of the end customer getting into financial straits could lead to a breakdown in trust and brand loyalty that will impact the retailer directly.

So, whilst BNPL and Black Friday have the potential to be a great duo for all, retailers must carefully consider which BNPL firms they partner with – at a time when the FCA is pushing for its Consumer Duty, a framework designed to create better consumer outcomes – to avoid compromising the integrity of their brand, damaging customer relationships and, ultimately, impacting sales.

And those sales will also be bolstered just simply by having BNPL as an option at the checkout. Last year saw an uptick in BNPL adoption of 87 per cent and 200 per cent for Generations Y and Z, respectively. This shows the appetite for the payment method, as Millennials and the iGen seek out value and transparency at the point of purchase. Add to this that the pandemic is still driving people to shop online and BNPL and Black Friday could make for the perfect partnership.”

 

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Samantha Fogerty, Managing Director of Payl8r

samantha fogarty

“There’s no doubt that people will use Buy Now, Pay Later to take advantage of Black Friday deals; the benefit is that it gives them the opportunity to bag more time-sensitive bargains than they’d normally be able to because they can spread the payments.

We’ve just gone into partnership with Cash Generator so hopefully our flexible way of lending will be a perfect fit for its customers, just in time for one of the UK’s busiest shopping days.  Of course, we do see a rise in agreements at this time.  In 2020, we saw a 15% increase in sales in the week of Black Friday from the previous year and in 2021 we forecast an even bigger increase of around 20 to 25%.”

 

Josh Partridge, Managing Director UK & Co-Head of EMEA of Yahoo

Josh_Partridge

“As a lasting effect of the pandemic, shoppers are increasingly concerned about their finances, particularly in the lead up to Christmas. In a recent study by Yahoo, 16% of UK consumers said they will spend less this Christmas, compared to 11% who said they will spend more. In light of this, consumers are looking to save money wherever possible and 21% will be shopping for Christmas presents on Black Friday to help cut down on spending.

These financial concerns have also led to a boom in Buy Now, Pay Later (BNPL) services, with over one in four (26%) having used them before and 39% of these consumers planning to use BNPL services for their Christmas shopping. However, while these services are growing in popularity, there’s still some uncertainty around BNPL as a financial alternative. While 60% of users say that BNPL services “helps spread the costs of items across a longer period of time”, 61% of non-users think it “encourages people to get into debt they cannot afford.”

Nevertheless, there’s no denying that BNPL services, such as Klarna, have been gaining traction over recent years. So for brands, offering these payment alternatives will be key to capturing Black Friday spend.”

 

Richard Sherlock, DPO of PayDayLoansNet

Richard Sherlock

“With Black Friday approaching on the 26th of November ‘Buy Now, Pay Later’ schemes can be the perfect way to purchase Christmas gifts as well as many reduced items in the sale. Buy Now, Pay Later schemes allow you to buy something immediately without paying anything until a later date. This enables you to buy all your Christmas gifts in bulk, and pay them off in easily digestible instalments.

Many schemes offer a 30-day pay policy, whilst others allow up to a year to pay off what you owe. There are many positive things about Buy Now Pay Later services; not only do they allow you to purchase expensive items/many items all at once and avoid cash flow problems, they can also help to boost your credit score, as long as you make your repayments on time.  ‘Buy Now, Pay Later’ can also work well if you need something urgently but don’t have the cash to hand, as long as you’re confident you can make your repayments on time.

In terms of negatives, obviously not paying the full amount back before the deadline can have a negative impact on your credit score, so you must always ensure you have the means to pay back what you owe, before using buy now, pay later services.”

 

Tony Craddock, Director General of The Payments Association

tony craddock

“Buy Now, Pay Later (BNPL) is just consumer credit by another name. And with any sort of consumer credit comes the same responsibilities for open communication, careful credit evaluation and sound repayment terms. The trouble with BNPL is that for many consumers, especially those heading into Black Friday, it’s too good to be true. Free credit? Regular payments? Easy to select online or in person? It doesn’t even sound like I would go into debt. So why not opt for BNPL? It looks amazing. Which is why it has grown so fast.

For a single purchase, spreading payments out across several months can make buying higher value products possible. The problem arises when my circumstances change. Maybe I have bought too much on BNPL to pay the whole lot back in three months time when all repayments coincide, and then I incur penalty interest charges? Or maybe my disposable income falls because I have fallen sick, lost my job or crashed by car and have to repair it? Then what happens?

Well, it turns out for those people, BNPL really was too good to be true. They default on repayments or get themselves in a repayment interest spiral, where most of their disposable income goes onto repayment of debt interest and no principle. For those people, it all ends in tears. Which is why the regulator needs to be all over the sector. And why I will not be investing in a BNPL provider anytime soon.”

 

Nikhita Hyett, EU Managing Director of BlueSnap

nikita hyett

“With the pandemic continuing to affect consumer buying power, it’s crucial that retailers offer a range of flexible payment and fulfilment options on Black Friday. Buy Now Pay Later (BNPL) options mean retailers can push big ticket items and help shoppers spread their pounds further – even in these challenging economic times. However, retailers should think carefully before buying into the promise of higher conversions and average order sizes. BNPL providers can see low conversion rates because customers often fail the soft credit check at the point of sale. This leads to frustration and, sometimes, checkout abandonment, with customers opting to find the same product elsewhere or aborting the purchase completely.”

 

For any questions, comments or features, please contact us directly.

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