Retail payments have come a long way since manually-operated cash registers that pop open a drawer. We examine how changing consumer behaviour has driven innovations like the current switch to Buy Now Pay Later platforms.
Since 2015, Buy Now Pay Later (BNPL) platforms have been growing rapidly in Australia and New Zealand. Often described as a digitised version of the traditional layby or layaway programme, BNPLs allow consumers to make a deposit on their product, take possession of the product and then complete their payment over a certain number of interest-free instalments.
New Zealand Post’s 2019 Ecommerce Review says these platforms are driving rising ecommerce spend in New Zealand by removing barriers to purchase, increasing the chance that browsers will become buyers.
“Overseas experiences show these are shoppers who buy more, spend more per transaction and also come back more often. The continued growth of BNPL is a trend that retailers just can’t ignore.”
The review indicates that over 228,000 Kiwis have already signed up to BNPL schemes and 12 percent of online shoppers have used BNPL. The platforms are particularly popular with women and young people – 70 percent of BNPL purchases were made by female customers in 2018, and 80 percent of BNPL spend came from under-45s.
BNPLs captured 20 percent of New Zealand’s total clothing and footwear spend last year. With 40 percent of all BNPL spending happening in Q4, the evidence suggests much of this spending was Christmas-shopping-related.
Shaun Quincey, Latitude’s General Manager Buy Now Pay Later, founded BNPL platform Genoapay from his home in Auckland’s North Shore in 2016. He’s proud of the value Genoapay offers to consumers, describing BNPLs as “the most affordable way to pay” for lower-priced consumer goods.
“If you drill down to the smartest way to buy something for under $500, it would be a buy now pay later solution,” he says. “It’s simply that, it’s the ability to spread that money over a period of time. It’s more affordable than cash, it’s more affordable than traditional credit.”
Products like Genoapay democratise access to loans under $1500 for segments of consumers who might struggle to borrow larger amounts through traditional credit channels, and BNPLs also teach these consumers responsible repayment behaviour.
Quincey says New Zealand consumers continue to favour credit, so it’s up to industry participants and retailers to show leadership by maintaining transparency and educating customers.
His advice to retailers offering credit is to make sure they’re partnering with a trustworthy lender that provides plenty of support to both staff and customers: “Make sure you’re dealing with a responsible lender. Make sure they’re doing background checks. Ensure the payments provider is training your staff and has enough team on the ground to train your staff.”
BNPLs are just the latest in a series of recent payments innovations. While electronic payments continue to grow, older technology such as cheques continues to trend down. Payments NZ reports that in 2018, cheques made up just four of the 462 average payments made per person, down from five in 2017. The ration of electronic payments to cheques stood at one cheque per 120 electronic transactions in 2018.
New Zealanders still love paying with a physical card, however. According to Payments NZ, the average Kiwi makes a transaction with a physical card nearly every day.
Cash is also trending down, but according to Retail NZ’s ‘Future of Cash’ survey, it’s still critical to New Zealand retailers: while 61 and 70 percent of respondents reported that the value and proportion of cash transactions had declined over the past five years, respectively, only four percent had considered ceasing to accept cash in the last year.
Contactless payments were launched into New Zealand with Visa’s PayWave technology in 2011. Mobile wallets soon followed – a local app called Semble was one of the first to market in 2015, and when Apple Pay launched in 2016, it stoked consumer enthusiasm for the concept.
Contactless technology is still filtering into the market, with a number of New Zealand retailers delaying their roll-out due to comparatively higher fees.
This story was created with the support of Gem powered by Latitude.
The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!