What:  A critical review of the BNPL situation and what is means for retailers.

Why it is important:  This is not the first negative article on BNPL, however retailers should be more worried on an over-dependence on this mean of payment for strategic reasons rather than for fear of the public opinion.

The article reports that the BNPL solutions have risen in the US, from $3bn in 2019 to $55bn last year. Analysts believe that the momentum is going to continue as this is becoming a favourite payment method for younger customers.

However the Robin Report questions the benefits for merchants as well as the long-term sustainability of the business model:

• BNPL operators charge merchants between 1,5% and 7%, with an average between 4 and 6%. Credit card fees charge on average roughly half of this, as well as debit transaction costs. This is due to the fact that in the case of BNPL, merchants cover a financing cost, whereas in the case of credit cards credit companies make money on the balance carried from month to month by customers,
• BNPL is said to reduce cart abandonment and encourage customers to make bigger purchases, leading to incremental sales. However, in reality, BNPL solutions, if they allow to make one given day a bigger expense, puts a weight on the coming weeks and the customer’s capability to buy something else during that period. In addition it seems to be difficult to confirm the BNPL solutions’ contribution to sales increase.

While there are questions on the morality of the business model, The Robin Report mentions that there is a risk that delinquency rates explode in the US now that the US government stimulus measures are not here anymore to support spending. For retailers, the good news is that they do not support this risk, and for them, it is all about not becoming depending on this new credit tool to drive sales for a question of controlling strategic risks.

Buy now pay later: the jury is out!