The Long-term Effect of Buy Now, Pay Later


Point-of-sale financing services like Klarna and Affirm make it effortless for internet shoppers to purchase now and pay later. These financial tech businesses have the ability to decrease checkout friction and please customers, but they might impact ecommerce in other, […]

Point-of-sale financing services like Klarna and Affirm make it effortless for internet shoppers to purchase now and pay later. These financial tech businesses have the ability to decrease checkout friction and please customers, but they might impact ecommerce in other, perhaps unexpected, ways.

For many online vendors, point-of-sale financing services can be a blessing. Integration is typically simple. Merchants get paid instantly. Rates and fees aren’t outstanding, and, as with the majority of payment solutions, there are few or no upfront costs.

What is more, including Klarna, Affirm, or like a checkout page is very likely to improve conversions. And both Klarna and Affirm will expose a shop’s products and new to millions of possible customers.

Thus adding a point-of-sale financing solution to ecommerce websites is apparently a no-brainer. Yet there are a couple of long-term implications.

Let’s see our product:

Funding as Marketing

At the time of writing, Klarna received about 85 million social media impressions per month. The company had about 7.5 million monthly active users. Klarna’s”Smooth shopping” app was the ninth most common retail app in the iPhone App Store supporting Amazon, Walmart, and Target.

Klarna’s app ranked higher than Wish, Etsy, Macy’s, Sam’s Club, Kohl’s, Best Buy, and Walgreens, to mention a few.

Klarna is one of the most popular retail shopping apps. It may bring in shoppers not because of what they can purchase through the app, but the way they could cover.

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So what does that indicate?

Imagine you are a shopper. Christmas is around the corner. You are nervous about spending money or even running up credit card debt during the pandemic. The possibility of breaking up your holiday gift purchases over four installments has much appeal.

Well, you can. You only download the Klarna app, store away, and voila, you can”cover four at any shop,” making four interest-free payments within six weeks.

While this is extremely beneficial for many shoppers, the advertising department at some retailers may be worried. The time and money it has spent in attracting and converting clients just went out the window.

Many Klarna and Affirm app users are probably shopping at a shop not due to marketing but as a result of extended payment choices. Thus offering one or more search-engine funding services may be a marketing requirement.

Trouble Differentiating

When funding their related mobile apps become a kind of marketing and client acquisition, differentiating retailers becomes hard.

Consider the Amazon marketplace. Selling national brands like Tide, Kleenex, or Nike isn’t the norm for smaller companies — competing head-to-head against huge companies.

Many successful Amazon sellers are direct-to-consumer brands. They produce a product that’s different somehow.

The same idea could apply to the Klarna and Affirm apps. These point-of-sale financing services may be creating marketplaces using their own kind of search engine optimization and product marketing and their own methods of differentiating products and stores.

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Customer Relationships

Is a shopper that pays for an order with Klarna or Affirm a client of the merchant or those funding services?

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When she visits an ecommerce shop and pays using a Visa card, a shopper is, possibly, a customer of both Visa and the merchant. She’s acquiring a service from Visa and a merchandise from the shop.

This may also be true of a point-of-sale financing support. When he pays with Affirm, a shopper is a client of both Affirm and the merchant. Like the Visa instance, he’s obtaining a service from Affirm and a merchandise from the shop.

Visa and other payment card suppliers have generally played fine with customer relationships. By way of instance, Visa has an app that helps consumers find discounts and deals while shopping, but Visa has refrained from sending emails to clients whenever they buy, encouraging them to store through a Visa-specific marketplace.

Klarna and Affirm aren’t quite doing so either, but they’ve been promoting their apps.

Payment Complexity

As the prevalence of buy-now, pay-later ecommerce increases, integration with ecommerce shopping carts, mobile wallets, as well as bodily point-of-sale systems will be vital if payment complexity is kept to a minimum.

Imagine, as an instance, if it became normal for merchants to provide point-of-sale financing from Klarna, Affirm, PayPal, Afterpay, Sezzle, Quadpay, and similar. The shopper could face a voucher with more logos than a European football team.

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