The Buy Now Pay Later method (BNPL) is gaining popularity among consumers and retailers and should surpass the traditional bank slip, positioning itself as the third most accepted form of payment in online transactions. This is what points out the unprecedented study commissioned by Pagaleve & fintech that offers installment via Pix, a modality of the BNPL sector & realized by GMattos consulting.
The growing preference for forms of installment payments that do not require a card reinforces how traditional payments, such as credit card, which until recently was seen as practically the only means of installment, do not serve a relevant part of the population. For example, 38% of Brazilians do not have access to credit card.
According to the survey, the Buy Now Pay Later method, currently in 4th place in online acceptance, is rapidly decreasing the difference from the 3rd place, the boleto.In July 2022, the difference between the two methods was more than 60 percentage points. Already in May 2024, this difference fell to 17.5 percentage points, evidencing the growing adoption by modalities of BNPL by consumers.
In addition, by following the general online acceptance of BNPL, we already see an acceptance with the highest historical value since the beginning of the measurement, reaching 42.4% in May/24.
If on the one hand BNPL is on the rise in the market, on the other there is a general slowdown in online sales growth, causing instability for the shopkeeper who has been trying to reinvent himself by looking for new ways to improve revenue, to compensate for the slowdown in demand.
The average annual growth of online sales in the period from 2019 to 2022 was higher than 20%, while in 2023 it reached just over 13%, with a downward bias for the coming years. The instability makes retailers look for a way to overcome the obstacle through initiatives such as review of the offer of installment via credit cards, research and implementation of new modalities, such as BNPL.
Retailers have also been looking for initiatives that help improve cart conversion, which includes, for example, reevaluating the fraud prevention process adopted. It is common for merchants to have a significant volume of credit card purchases rejected by risk analysis, affecting sales conversion, since part of these rejections may involve legitimate transactions.
The Pagaleve Proprietary Study estimates that, in 2023 alone, the volume lost by transactions denied by anti-fraud limit shopping platforms was higher than R$ 200 billion.In addition, in the last 5 years, the payment chain has ceased to approve more than R$ 700 billion buyers with sufficient limit for transactions.
Henrique Weaver, CEO and Co-founder of Pagaleve, explains that by improving the percentage of payment acceptance and reducing obstacles in the customer's purchase journey, retailers can position themselves more strongly in the market and sell more. “The firm adoption of BNPL through the Pix Parcelado is critical. This not only aims to increase sales, but also reduce undue rejections, reinforcing competitiveness in a challenging economic environment”, he ponders.
Weaver also explains that the main factor of the average conversion reduction in the use of credit cards in online purchases is the rejection in excess. The average conversion in face-to-face purchases is 95% against 70% in virtual purchases. Prevention platforms have an essential mission to reduce the loss brought by chargeback. However, in this prevention, part of the transactions are rejected by risk, but eventually in the wrong way, resulting in the cart conversion drop. “For those who want to escape high chargeback costs or have potential sales rejected by anti-fraud systems, implementing payment methods that do not charge chargeback and do not hold merchants accountable for fraud is an excellent solution”, reinforce Weaver.
GMattos, for example, estimates that in an e-commerce with EBITDA (a financial indicator used to evaluate a company and understand cash flow) of 5%, improving the conversion of the cart by 5 percentage points implies raising its EBITDA to 7.5%, that is, a growth of 50%
Instability of the card favors the offer of BNPL
While always treated as a priority, cart conversion management has never been more valued than it is today, at a time when stores have been looking for ways to suffer less from the reduction in revenue generated by the slowdown in e-retail.
To optimize the average conversion of the checkout, one of the strategies is to promote the use of payment methods known for their efficiency. In this sense, Pix stands out by achieving an average conversion in the cart of 90% or more, being the means of payment with the best performance in approval.
Credit cards, despite occupying the second place in the ranking, are with more restricted installment conditions. The study of Pagaleve points out that in May this year there was an oscillation in the installment plans without interest via card. The installment offer in 10 times, for example, significantly reduced, while the plans of 3 times and 6 times increased. The practice of offering cash payment options on the card remained stable in 8.5% of the stores, the same index of the previous measurement. On the other hand, 29% of the stores began to offer installment payment options in 10 year 20 to the card registered in 23T.
Henrique Weaver explains that this movement is expected, driven by technological transformations in the means of payment and by the retail goal of reducing costs related to default and fraud, which consume about 2% of the revenue of retailers, according to the first study by Pagaleve. “The reduction in the supply of installments without interest in shorter terms may indicate a cash flow management strategy by stores, seeking to balance operating costs with maintaining competitiveness. On the other hand, the increase in installment options with interest may be driven by the need to ensure profit margins in the face of a challenging economic scenario”, he concludes.
