Ask the expert – How can buy now, pay later services optimize payment authorization and streamline the customer experience?

In the last few years, the popularity of buy now, pay later (BNPL) and instalment-based payment systems in the United States has skyrocketed. Over a third of U.S. consumers have used one, and it’s easy to see why. BNPL allows consumers to maximize their budgets to get the desirable items they want, while paying back the full amount over a longer period.

Besides the benefits of increased spending, these payment systems also make it easier for businesses to sell products online and reach a significantly larger number of customers than they otherwise would. However, BNPL isn’t without risks. For example, only 22% of people say they understand the terms and conditions associated with it, which can lead to significant problems down the line, for both the customers and potentially the BNPL providers.

Mitigating these concerns in a way that doesn’t impact the customer experience is the best way for BNPL providers to gain a competitive advantage and improve their relationships with merchants, while also protecting their own revenue. Here are some of the key questions BNPL providers need to consider when adding buy now pay later to their payment offerings:

How important is convenience for BNPL?

For BNPL services, convenience is key. The more difficult it is to process a payment and the longer it takes, the more likely it is that shoppers abandon their purchase altogether. In 2021, 1 in 5 digital shoppers abandoned their cart due to long and complex checkout.

For online finance services, more than 56% of people admit to having abandoned an application, with 40% saying they did so because of the amount of personal information required.

BNPL could help in making checkout less complex, because one account can be used on multiple websites, making the process one-click after the initial account setup. However, it’s important to balance the convenience of buy now, pay later with security in order to prevent fraud.

How can BNPL providers keep convenience high for every transaction?

The very nature of BNPL is based on repeat transactions, but customers usually don’t appreciate being asked for their payment details again every few weeks. Once the initial card information has been supplied, the process should be hands-off for the customer.

Services like Account Updater from Worldpay can help, as it checks for changes in your shoppers' card details and ensures they are up to date. This means that your customers only need to give their card details once, saving them time and frustration.

When you use Account Updater to keep card details up to date, recurring payments can occur without interruption.

How can BNPL providers prevent authorizati0on issues and fraud?

Balancing ease of access with fraud is an area that buy now, pay later providers need to get right. If the process is too long and complicated, users could become frustrated and move on. But the same is true if things are too simple. Twenty-seven percent of customers abandon a transaction if there is no visible sign of security checks. Reassuring them with visible signs of a security check can therefore be a major benefit.

For BNPL providers, preventing authorization issues, such as false declines, while also protecting against high levels of fraud is naturally important. Recent research predicts that losses due to false declines will grow to $443 billion by 2021, while the same research shows e-commerce fraud will grow to $6.4 billion. So, what can companies do to overcome this?

Fortunately, it’s an issue that can be remedied. Using a tool such as Authmax from Worldpay could make a difference. By analyzing the data from more than 40 billion annual transactions, it can maximize approvals and minimize false declines, making buy now, pay later systems safer and more convenient for providers, merchants and customers alike. It also helps to lower default rates as customers can pay back the full amount over a longer period.

The benefits of BNPL are massive for customers, but with a few simple tweaks, these could be increased even further. Like partnering with WorldPay: Together, we can help take your service to the next level with products that accelerate processes, improve security and lower false declines, potentially saving your business time and money.

Speak to Worldpay today to learn more.

Editorial Note: This article was originally published in February 2021. It has been updated for accuracy and comprehensiveness.