BNPL giants are targeting in-store transactions to drive growth amid rising competition and macroeconomic threats

BNPL giants are targeting in-store transactions to drive growth amid rising competition and macroeconomic threats

BNPL giants are targeting in-store transactions to drive growth amid rising competition and macroeconomic threats

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As the impact of the global pandemic continues to diminish, consumers are again returning to their pre-pandemic shopping habits. Online sales have been impacted and there are several factors responsible for the drop. Inflation has surged and interest rates have grown significantly. This has led some consumers to forgo buying big-ticket items such as electronics, which are often purchased online. For others, the need to get out and socialize is driving the growth of in-store transactions.

As consumers turn to in-store shopping, BNPL giants are also pivoting their strategy to drive growth amid rising competition and macroeconomic threats. Several players, including Klarna and Zip, have been seen targeting in-store transactions to accelerate their transaction volume and value. For instance,

  • In October 2022, Zip, one of the leading BNPL players based in Australia, announced that the firm had entered into a strategic alliance with WebBank. Under the strategic collaboration, the two firms are launching a physical card, as Zip looks to make in-roads into the growing in-store shopping trends.

The Zip card will allow consumers to use the Pay-in-4 feature offered by the firm at all retailers wherever Visa is accepted. Under its pilot program, the firm revealed that more than 90% of the consumers stated that a BNPL card makes the in-store transaction easier. Notably, a waitlist of 250,000 users shows the demand for physical BNPL cards.

Other global leaders in the BNPL segment, such as Klarna and Afterpay, have also increased their focus on in-store transactions. These firms are looking to make major in-roads in the offline retail segment through strategic collaborations and tie-ups with leading brands. For instance,

  • In July 2022, Klarna entered into a strategic partnership with Blackhawk Network, a branded payments provider. This collaboration will bring the BNPL payment method offered by Klarna to consumers shopping with offline merchants. This partnership will span beauty, electronics, groceries, and other categories.
  • In May 2022, Clearpay, also known as Afterpay outside the United Kingdom and Europe, announced that the firm is extending its BNPL services to smaller high-street retailers across the United Kingdom. Notably, the firm launched the BNPL service to large merchants in November 2021.
  • With compelling results, the firm has now extended its offering for smaller merchants, thereby enabling them to increase their basket sizes and sales. During the three-day sale event organized by Clearpay, smaller merchants experienced a growth of 32% and 33% in sales and new active customers, respectively.
  • In May 2022, MultiPay announced that the firm had forged an alliance with Mastercard to launch in-store BNPL service for consumers in Ireland. Notably, Mastercard has also forayed into the deferred payment space to capitalize on the high growth of the segment and the growing popularity of the BNPL product among consumers globally.

The in-store transactions are expected to rise significantly over the next few years. Consequently, BNPL firms globally, including in the Middle East and North Africa region, are also targeting in-store transactions. For instance,

  • In September 2022, Tabby, one of the leading BNPL providers in the region, announced that the firm had entered into a strategic collaboration with Paymob, a digital payment solution. This collaboration means that the BNPL service offered by Tabby will be available at over 120,000 Paymob merchants, both online and offline, in Egypt.

This move to attain a big share of the in-store transactions comes at a time when online BNPL space is saturating. Notably, many online merchants are offering BNPL payment options from various providers. With little to no differentiating factor, BNPL players are finding it difficult to capture consumer spending online.

The competition in the online segment has intensified and macroeconomic issues have dampened the growth prospect for BNPL firms around the world. Rising interest rates and fears of recession have forced BNPL firms to re-evaluate their growth strategies. Furthermore, regulation is taking shape in the background. Several governments, including Australia, the United Kingdom, and the United States, have drafted BNPL regulations, which include strong credit checks and tightening oversight over the operations of these players.

This is expected to further slowdown the growth of BNPL providers. Consequently, the move to capture in-store transactions can fuel the growth of players like Klarna, Zip, and Afterpay amid the tighter market conditions over the next three to four years. Furthermore, consumer in-store spending is projected to grow significantly in Q4 2022. Consequently, non-e-commerce retail sale is where these players are targeting to drive the next growth phase of the global BNPL market.

To know more and gain a deeper understanding of the global BNPL market, click here.

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