Ecommerce is evolving to be about more than just an online store. It’s about providing the ultimate experience for your shoppers, with a seamless shopping process that fits perfectly into their life. This includes flexible payment options and other features that make it easier for customers to purchase from you. In this post, we’ll explore this evolution and what you need to do to keep up with the competition. 

In recent years, ecommerce has grown exponentially as consumers have become more comfortable purchasing goods online while on the go or at work. As a result, merchants have been forced to provide a comprehensive customer experience where payments can be made without friction—through different types of flexible payments or BNPL (Buy Now Pay Later).

Flexible Payments and BNLP Explained

Buy Now Pay Later (BNLP) is a service offered by retailers which allows you to shop now and pay later. BNPL has consistently been gaining ground for the past decade, and with the onset of Covid and the extreme surge in online shopping, it’s never been more relevant.

There’s a wide array of payment options for digital merchants, and this alternative payment option has proven to be especially popular among consumers. According to Worldpay, the use of BNPL options is estimated to grow at a CAGR (compound annual growth rate) of 28%, and to reach $166 billion by 2023. The most recent Adobe Digital Economy Index shows that BNPL services grew by 88% in the first half of 2021, compared to 2019 levels.

5 Things To Know About Flexible Payments and BNPL

Not All Categories Are Equally Well Suited For BNPL

BNPL is attractive for many reasons. The reduced friction encourages spontaneous shopping and impulse purchases, and the general convenience creates a “get it now” mentality. It eliminates the potential roadblock of not being able to pay. It offers a low commitment, interest-free way of postponing the unpleasant ordeal of spending money while enjoying the dopamine rush of purchasing something.

But the use of BNPL varies significantly between different merchandise categories. It’s more popular with more expensive products. For example, in Q1 2021, 30% of the payment platform Affirm’s revenues came from the Peloton website alone.

Multiple Payment Options Increase Online Conversions

Today’s consumers are more likely to use mobile devices than ever before when browsing online for products or services. The more straightforward a process for customers to buy products or services online, the more likely they are to do so. Flexible payments, such as installment payments and BNPL options, are one way of removing both mental and actual obstacles in the buying journey. According to estimates by RBC Capital Markets, offering a BNPL option increases conversion rates in retail by 20% to 30% while also lifting the average order value by between 30% and 50%.

Related reading: E Commerce and M Commerce Trends

BNPL Increases New Customer Acquisition

Offering multiple payment options can help load the acquisition funnel and attract new customers who may not have otherwise converted. Filling your sales funnel with new customers is essential to growth. Thanks to the appeal of BNPL, retailers can enjoy higher spend per visit and a more significant influx of new younger customers, who are the prime demographic for this type of payment.

One example that showcases this is Indochino. The company, well known for its custom-made suits, targets a younger crowd by offering BNPL through Klarna. Approximately 67% of Indochino customers using Klarna are either millennials or Gen Z consumers, and they have a 16% higher AOV (average order value). According to eMarketer, Gen Z is the U.S. generation that’s most likely to use BNPLs (36.8%), while people tend to prefer it less as they get older. eMarketer estimates that by the year 2025, almost half of Gen Zers will be using BNPL!

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BNPL Offers An Attractive Post-Covid Alternative To Credit Cards

As a way to postpone payments and increase liquidity, BNPL offers an alternative to traditional credit cards. The rise of ecommerce during the pandemic accelerated BNPL growth for several reasons. On the one hand, the pandemic left millions of consumers unemployed and financially insecure, and in need of greater flexibility with their purchases.

On the other hand, many consumers actually paid off debt during the crisis, making interest-free BNPL solutions an attractive alternative to racking up another high credit card balance. In doing so, many consumers are turning to BNPL as a cheaper and more convenient alternative to traditional revolving credit. Whichever the motivation, an increasing number of shoppers are now turning to these loans as a cheaper and more convenient option than traditional credit cards.

BNPL Is Perceived As Part Of The Shopping Experience

When you compare making a purchase with BNPL and using a credit card, the experience is quite different. While credit cards require a commitment and an ongoing relationship with the provider, BNPL solutions are instead applied to individual transactions. This makes them more appealing to many consumers who prefer to make less of a financial commitment and avoid establishing ongoing relationships with the credit grantor.

With BNPL options, the credit is often perceived as simply a part of the checkout process from the retailer. Some may even associate the payment option directly with the retailer rather than the third-party credit provider supplying the BNPL service. Most BNPL companies have invested heavily in positive brand building to create positive associations with this payment option.

Our partner Klarna has made substantial investments in branding and transparency initiatives to help consumers feel safe and at ease with choosing BNPL at checkout. And it is paying off. According to, in August Klarna doubled its U.S. customer base reaching 20 million customers of which four and a half million are active monthly users of the Klarna app.

Related reading: 8 Steps To Building A Winning International Ecommerce Strategy

Key Takeaways

Optimizing your customer experience includes optimizing the payment process and making it as convenient and attractive as possible for your customers. Today, offering the BNPL option is quickly becoming standard, and it’s something shoppers have come to expect from ecommerce merchants. The companies who fail to keep up with payment trends and who don’t offer the payment options that are in demand will fall behind in the fierce competition of today’s ecommerce landscape.

Payment optimization needs to be part of any digital strategy. This includes a flexible payment strategy that reduces payment service provider (PSP) costs, maximizes transaction approvals, and gives merchants the ability to gain analytical insights.

In this article, we’ve looked closely at the following five aspects of BNPL and flexible payments:

  • Not all categories are equally well-suited for BNPL
  • Multiple payment options (such as BNPL) increase online conversions
  • BNPL increases new customer acquisition
  • BNPL offers an attractive alternative to credit cards
  • BNPL is perceived as part of the shopping experience

One thing that can separate this payment method from others is the potential for brand loyalty. Yet, since flexible payment options are viewed as a checkout option provided by the retailer, it is important to mitigate the potential risk of a bad customer experience. For this reason, it is imperative to establish solid partnerships with your chosen BNPL service providers.

Late in September, Mastercard announced the “Mastercard Installments” for the U.S., Australian, and U.K. markets. Walmart also recently announced a Buy Now Pay Later (BNPL) program. The fact that these giants are moving in this direction certainly signals that there is some serious growth potential to this modern-day equivalent to “layaway.”

How Vaimo Can Help

Flexible payments and Buy Now Pay Later (BNPL) solutions are becoming more mainstream in the commerce payment ecosystem. At Vaimo, we help clients navigate diverse offerings to increase revenue and engagement with their customers. We can help you learn more about leveraging appropriate payment options to build a seamless customer experience, to simultaneously increase revenue and loyalty. Get in touch with our team of experts today.

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At Vaimo we help brands, retailers, and manufacturers all over the world to drive success in digital commerce. Reach out to us if you want to hear more about how we can improve your customer experience strategy, go to market plan or explore how technology can enable success.