PAYMENTS & ECOMMERCE: BNPL
The oh-so-fashionable One in three Australians is said to have made a buy now, pay later transaction during the 2020 online holiday shopping season. We asked Francine Ereira, Klarna’s General Manager for Australia and New Zealand, why Down Under is a poster boy for BNPL Online spending accelerated the world over in 2020, and continued as we entered 2021 in various states of lockdown. But nowhere did shoppers embrace the virtual high street more enthusiastically than in Australia and New Zealand. Figures from Salesforce’s Holiday Insights Hub and 2020 Holiday Predictions report show ecommerce growth Down Under was the highest in the world, at 107 per cent, in Q3 of 2020. According to the report, the region’s retailers are seeing year-on-year growth across every metric: revenue, online traffic and order size. Based on its own, separate analysis, Australia Post predicted that online purchases will have exceeded 15 per cent of total retail sales in 2020, years ahead of the 16 per cent projected by 2025. Against this backdrop, it’s not surprising to see Amazon rapidly expanding its network of fulfilment centres, while Dutch ecommerce giant VidaXL has also recently built a mega warehouse in Melbourne. And, given the economic uncertainty, combined with a major shift in shopping channels, neither is it a revelation to find buy now pay later (BNPL) options being embraced like never before. The offer to ‘try before you buy’ and spread or defer payments for purchases, interest free and often without traditional forms of credit checking, has seen widespread uptake across the world, with many BNPL providers positioning themselves as ‘budgeting tools’, despite concerns that they can lead consumers into unmanageable debt. This month (February), the UK’s Financial Conduct Authority (FCA) said it would regulate the sector after a four-fold rise in consumers accessing what’s sometimes seen as ‘soft credit’ – one in 10 of them already having built up debt arrears elsewhere, according to the FCA. Europe’s leading BNPL operator Swedish unicorn Klarna (worth $11billion globally) – welcomed the regulator’s move. It serves
26
TheFintechMagazine | Issue 19
90 million customers through arrangements with 200,000 merchants handling one million transactions per day in Europe, the UK, the US and, since January of last year, in Australia and New Zealand. In a statement, the company said that ‘regulation has not kept pace with new products and changes in consumer behaviour’ and called for a 'modern, proportionate and fit-for-purpose’ regime. It was a relative latecomer to the competitive BNPL market in Australia and New Zealand. Nevertheless, 12 months later it has 500,000 registered users. Francine Ereira, general manager for Australia and New Zealand, who led Klarna’s move into the region, says the pandemic has forced retailers to embrace digitisation of their businesses, sometimes more by necessity than desire – and offering consumers a range of payment choices is critical to drive revenue as they establish new business models. “Australia was one of the first countries to move into quite stringent lockdowns, shutting down retail stores relatively quickly,” says Ereira. “So we’ve seen a
The data and insights we collect around purchasing habits allow us to sit down with retail partners, understand their key objectives and enable them to make better strategic marketing or operational decisions massive acceleration in the world of ecommerce. Yes, there were some amazing retailers that were already very digitally savvy, with very strong digital programmes, that quite seamlessly shifted into gear. But there was also a really large proportion that had to start making things work fast, so that they
were in a position to attract and continue to engage with their audiences in new and different ways.” In one week of December, she says, 30 per cent of Australians completed a buy now pay later transaction online, compared to 10 per cent just 12 months previously. “The shift in consumer behaviour [to shopping online] has meant that retailers have had to evolve. As a company, we want to help with that process and bring a better experience to retailers as well as shoppers,” says Ereira. Alternative BNPL providers, such as Afterpay, Humm, Zip, Limepay, Bundll, Laybuy and LatitudePay, had already marked out their territory before Klarna arrived. Afterpay has roughly 3.4 million active customers in Australia, while Zip and Humm claim about 2.5 million each. According to 2020 data from research company Roy Morgan, more than 12.3 million Australians (59 per cent) are now aware of BNPL services, an increase of more than 20 per cent from 2019. So why is it proving particularly popular here? A 2019 report by J.P. Morgan suggests that Australia’s market is notable for its growing population of young people – a key demographic for many BNPL providers – and an ‘overall base of consumers that are willing to adopt a variety of emerging ecommerce techniques’. In addition, Australia has huge mobile phone penetration, strong internet infrastructure and enjoys a healthy economy in normal times. There is also a serious appetite for saving money through discounts, sales and loyalty schemes when shopping online, fuelled by an increasingly retail-centric social media. Add into the mix the country’s proximity to China – the ‘primary overseas shopping destination for Australian ecommerce consumers’ – and you have a country ripe for BNPL adoption. The COVID-19 pandemic has only served to fuel some of these motivators, www.fintechf.com