In a time of rising costs, individuals are especially keen to make purchases as affordable as possible. Cheques are history and cash is declining, which leaves debit and credit cards to take up the slack. The problem is that the former requires funds in an account to make a purchase and the latter usually offers up to 56 days to pay – and requires a credit check.
But there is an alternative that the optical sector needs to consider. Used by many including Boots Opticians, Leightons and Vision Express to name but a few, it is known as ‘buy now pay later’ – BNPL.
An unregulated instalment payment option, invariably with no hard credit search, it seeks to make products more affordable with interest and charge-free purchases.
BNPL has enjoyed explosive growth in recent years. As The Guardian highlighted in October, 2021, UK consumers spent more than £4bn using BNPL and an estimated 7.7m Britons have balances that average £538 for each borrower.
Labelled ‘the future of millennial finance’, it is very popular with the under 30s and those on tight budgets; it is estimated that by 2026 this form of finance could be worth £40bn a year. There are many providers that include Klarna, Clearpay, Laybuy and PayPal.
But BNPL is not without its problems. There is a growing concern in official circles that the unregulated nature of BNPL is causing problems for many. Some, it appears are racking up BNPL debts that they cannot afford; those failing to keep up with payments are now accumulating charges or, in some cases, seeing their credit file impacted with loans or mortgages being denied following debt collection action.
Notably, mid-February (2022), TransUnion said that from Summer 2022, BNPL transactions will start to appear on credit files. The move will record missed payments and conversely, help those with ‘thin’ credit files build up a credit profile as they make consistent payments.
The benefits of BNPL for practices
But problems aside, BNPL has the potential to be a very valuable tool for opticians looking to enhance their popularity among the buying public.
It’s important to remember that BNPL seeks to promote a frictionless buying experience for users; the more ‘stop’ points there are in the buying process, the greater the likelihood of a shopping basket being abandoned.
But for practices, BNPL offers a way of selling more while being paid up front; all with protection from repayment risk and fraud.
It opens doors to more people, especially to those that do not possess a credit card. BNPL is very convenient way to access financing; there are no separate application forms, no application fees, and minimal additional processing time, and most providers have simple-to-understand repayment plans and terms; customers can buy with ease in just a few clicks after first registration.
The ability to spread cost interest-free is a wonderful sales conversion tool, which makes customers more likely to make a purchase; it should not be a surprise that retailers offering BNPL invariably see their average sales value boosted as additional items appear less expensive because the extra cost is spread.
In practical terms, the consumer shops as normal. However, when they get to an online checkout, alongside traditional payment options like credit/debit card and PayPal, they will also see the option to pay through a BNPL provider. A quick eligibility check is run, often in the form of a surface inspection of the shopper’s credit history, and the BNPL provider will either approve or reject the customer. Alternatively, for in store purchases, some BNPL providers offer a digital payment card for a user’s smartphone.
Choosing a BNPL provider
The question for practices, then, if they want to offer this form of finance, is which BNPL provider to choose? The answer to that will depend on what is sold and its price.
Terms
BNPL providers, like banks, offer different products with different repayment periods from weeks and months to years. Those selling higher value goods will do better with a provider that offers payments over six or more months.
Credit limits
Just as customers carry different repayment risks and therefore different credit histories, so some BNPL providers operate minimum and maximum credit limits. This means, by definition, tying up with a provider that can offer customers enough credit for a purchase to be made.
Integration with ecommerce is not an issue either. The two biggest operators, Clearpay and Klarna, offer integration and a bespoke service if necessary.
To an extent, anything that helps opticians generate more revenue is a good thing. BNPL is going to see regulation in time. However, for the moment, it is an option that independents cannot afford to ignore; rivals have not.
Lynne Fernandes Optometrists
Although the company offers BNPL, Gerard Fernandes, optometrist and director at Lynne Fernandes Optometrists, says the practice prefers to offer patients the ability to spread the cost of purchases through its own interest free payment plan run on the Optix direct debit system.
He says the practice sees a return on this: ‘Many younger clients are used to managing purchases over a year. Therefore, are encouraged to buy better quality products than they would if they were forced into a one-off payment.’
On top of that, he says that the practice has more than 3,000 EyeSense patients subscribed to its EyeSense direct debit system ‘who trust in our clinical services... many of these will purchase products for treatment such as myopia management ophthalmic lenses on extended terms related to their treatment appointments.’