O método Buy Now Pay Later (BNPL) is gaining popularity among consumers and retailers and is expected to surpass the traditional bank slip, positioning itself as the third most accepted payment method in online transactions. This is what the new study commissioned by Pagaleve— a fintech that offers installment payments via Pix, a BNPL sector modality— and conducted by the GMattos consultancy, indicates.
The growing preference for installment methods that do not require a card reinforces how traditional payments, such as credit cards, which until recently were seen as practically the only means of installment payments, do not meet a significant portion of the population. For example, 38% of Brazilians do not have access to a credit card.
According to the survey, the Buy Now Pay Later method, currently in 4th place in online acceptance, is rapidly closing the gap with the 3rd place, the boleto. In July 2022, the difference between the two methods was over 60 percentage points. By May 2024, this gap had decreased to 17.5 percentage points, highlighting the growing adoption of BNPL modalities by consumers.
Furthermore, when monitoring 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.
While BNPL is on the rise in the market, there is also a general slowdown in online sales growth, causing instability for retailers who have been trying to reinvent themselves by seeking new ways to improve revenue to compensate for the cooling of demand.
The average annual growth of online sales from 2019 to 2022 was over 20%, while in 2023 it reached just over 13%, with a downward trend for the coming years. Instability causes retailers to seek ways to overcome obstacles through initiatives such as reviewing installment options via credit cards, researching and implementing new modalities like BNPL.
Retailers have also been seeking initiatives to improve cart conversion, which includes, for example, re-evaluating the adopted fraud prevention process. It is common for retailers to have a significant volume of credit card purchases rejected due to risk analysis, affecting sales conversion, since some of these rejections may involve legitimate transactions.
Pagaleve's proprietary study estimates that, only in 2023, the volume lost due to transactions denied by anti-fraud platforms for purchase limits was over R$ 200 billion. Furthermore, in the last 5 years, the payment chain has failed to approve more than R$700 billion in buyers with sufficient limits for transactions.
Henrique Weaver, CEO and Co-founder of Pagaleve, explains that by improving the payment acceptance rate 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 Pix Parcelado is essential. This not only aims to increase sales but also to reduce unjustified rejections, strengthening competitiveness in a challenging economic environment," he considers.
Weaver also explains that the main factor for the reduction in average conversion when using credit cards for online purchases is excessive rejection. The average conversion rate for in-store purchases is 95% compared to 70% for online purchases.Prevention platforms have an essential mission to reduce the loss caused by chargebacks. However, in this prevention, some transactions are rejected due to risk, but eventually mistakenly, leading to a decrease in cart conversion.“For those who want to avoid high chargeback costs or have potential sales rejected by anti-fraud systems, implementing payment methods that do not chargeback or hold merchants liable for fraud is an excellent solution.”, reinforces Weaver.
GMattos, for example, estimates that, in an e-commerce with EBITDA (financial indicator used to evaluate a company and understand cash flow) of 5%, improving cart conversion by 5 percentage points implies increasing its EBITDA to 7.5%, that is, a growth of 50%.
Card instability favors BNPL offering
Although always treated as a priority, cart conversion management has never been as valued as it is now, a time when stores are seeking ways to suffer less from the reduction in revenue caused by the slowdown of electronic retail.
To optimize the average checkout conversion, one of the strategies is to promote the use of payment methods known for their efficiency. In this regard, Pix stands out by achieving an average cart conversion rate of 90% or higher, making it the best-performing payment method in approval.
Credit cards, although ranked second, have more restricted installment options. The Pagaleve study indicates that in May of this year, there was a fluctuation in interest-free installment plans via credit card. The installment offer in 10 installments, for example, decreased significantly, while the 3 and 6 installment plans increased. The practice of offering a discount for cash payments by card remained stable at 8.5% of stores, the same rate as the previous measurement. On the other hand, 29% of stores started offering installment payment options with interest on credit cards, an increase from the 24% recorded in March 2024 and the 15% from September of the previous year.
Henrique Weaver explains that this movement is expected, driven by technological transformations in payment methods and by the retail sector's objective of reducing costs related to default and fraud, which consume around 2% of retailers' revenue, according to thefirst study of Pagaleve. “The reduction in the offer of interest-free installments 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 interest-bearing installment options may be driven by the need to guarantee profit margins in the face of a challenging economic scenario,” he concludes.
