Cart abandonment is a major source of revenue loss for eCommerce businesses, causing a $4.6 trillion annual loss globally. And according to Statista, 88% of all items shoppers add to their virtual carts remain unpurchased.
Several factors contribute to cart abandonment, especially lack of transparency including hidden shipping costs, limited options, and a complicated checkout process. With so much lost revenue at stake, an increasing number of merchants are turning to Buy Now Pay Later payment options to address these factors and reduce cart abandonment.
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Buy Now Pay Later is a payment method that allows customers to choose an interest-free installment payment option at checkout. While terms differ across providers, Buy Now Pay Later options offer more flexible payment terms than traditional credit options.
By the end of 2021, one in three eCommerce brands is expected to offer one or more installment payment solutions to its customers—and for good reason. Merchants using the flexible option can experience a 10% decrease in cart abandonment. Here are three ways Buy Now Pay Later helps reduce cart abandonment:
Align with customers’ budgeting goals
Discovering the complete cost of a purchase, including shipping and other fees, is the number one reason customers abandon their carts at checkout. Though many merchants have reservations over showing the full cost upfront, offering installment payment options can mitigate sticker shock and simultaneously boost the user experience by providing full transparency.
And customers are increasingly seeking out this transparency as they become more budget-conscious. A $2,000 bicycle may be prohibitively expensive for many, but ten monthly payments of $200 are more affordable and fit more reasonably within a customer’s set budget. Aligning payment options with customers’ commitments to responsible spending is particularly alluring to millennials, where among those in their thirties 57% have established a household budget.
Provide customers with greater flexibility
Customers crave choice and flexibility. Just asking credit or debit is no longer sufficient as the popularity of contactless payments and digital wallets rises exponentially. Plus, a recent survey from Stripe reveals 70% of businesses sell internationally, further diversifying the customer base—and preferences.
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Buy Now Pay Later solutions allow customers to tailor their spending according to their personal preferences. They can make a small number of large payments or extend the payment period to allow for smaller installments throughout.
And Buy Now Pay Later is not a one-size-fits-all approach. Some solutions work within the customer’s existing line of credit and others enable customers to open a new line of credit at the point of sale, but all offer more flexible payment terms than traditional credit options. Just as merchants would accept Mastercard and Visa, offering multiple installment payment solutions provides the greatest value and flexibility for the customer.
Reduce friction at checkout
A transparent buying process not only establishes trust and helps merchants align with their customers’ personal finance goals, but it also reduces friction at checkout. The best user experience and lowest cart abandonment processes will address affordability before it becomes a reason to abandon the purchase at the final point of sale.
Buy Now Pay Later solutions offer a streamlined payment approach by proactively answering the affordability question and embedding payment options right into the buying process. But merchants must be careful to avoid inadvertently adding friction to the process, which can be a side-effect of certain Buy Now Pay Later solutions that require credit checks and applications at the point of sale.
No matter how user-friendly a business makes the shopping and purchasing experience, cart abandonment will never reach zero, though. This is why an integrated and personalized approach is so critical. Installment payments offer attractive retargeting messages of an affordable price and flexible payment options that continue the streamlined process through exit pop-ups, email, and advertising.
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