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WEIGHING THE PROS AND CONS OF BUY NOW, PAY LATER

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By Eric Christensen, Chief Payments Officer/Vice President of Product, Digital River

 

The global pandemic has dramatically accelerated the long-term consumer shift towards ecommerce channels. While the initial explosion in online shopping came out of necessity, with social distancing and shielding requirements restricting people’s ability to shop in store, it is safe to say the trend of online buying isn’t going anywhere. It wasn’t just the amount of online shopping that grew in 2020, but also the adoption of new payment methods for the benefit of consumers and businesses alike.

As ecommerce continues to grow, online payment strategies have become more important than ever. How merchants accept, process, reconcile and manage payments, especially on a global scale, has a direct impact on conversions and revenue. One payment method experiencing tremendous growth in customer adoption is known as Buy Now, Pay Later (BNPL), an option that allows consumers to pay for goods and services in instalments over time, often without interest. According to one recent analysis, the global BNPL platforms market was valued at over £5.2 billion in 2019 and is expected to reach over £24 billion by 2027. A new report commissioned by Klarna, has revealed that BNPL accounted for almost 4% of all online retail sales in the UK in 2020 with over 10 million users.

Paying in instalments is not a new concept; however, recent financial technology has helped to develop a risk algorithm that is making the method profitable for merchants. At the same time, younger generations are demanding choice and are more careful about using traditional credit cards. The current economic climate is expanding the audience for instalment plans to older generations that might previously have been uncomfortable with the idea. Individuals laid off or furloughed are likely to be very conservative when it comes to spending and BNPL offers those consumers the ability to control payments and avoid putting a large purchase on a credit card. It also gives consumers the ability to buy something now rather than having to save up for it.

Eric Christensen

While more consumers and even B2B customers are looking for BNPL, merchants must carefully consider the benefits and risks of implementing this option before adding it to their online stores.

 

Maximising your potential

One of the biggest attractions for brands looking to add BNPL as a payment option is the opportunity to increase revenue. Digital River found brands in the U.K. and Europe saw a 3 percent to 10 percent lift in gross revenue after adding a buy now, pay later option. Another benefit is the potential increase in average order value (AOV). It’s a key selling point for payment providers, including PayPal, which touts at 56 per cent increase in AOV with pay-over-time messaging.

Other benefits involve what happens after the transaction. Among them, the BNPL provider assumes the risk of non-payment and remits funds at the time of shipment, making the merchant whole immediately.

 

Is your business model suitable?

A major consideration for merchants is potential revenue lift might not exceed the increased cost of offering BNPL financing. A merchant generally pays a third-party financial technology provider a certain percentage per transaction. As such, merchants need to make sure the margin on the product is big enough to withstand that fee. If a merchant is geared toward selling smaller items that won’t produce that margin, they can consider adding a different payment method like one-touch purchasing to encourage purchases.

Another concern is BNPL financing might be confusing for some consumers who aren’t as familiar with technology and prefer a more traditional buying experience. To avoid any confusion or concern, make sure you proactively educate consumers with on-site messaging to make them more comfortable using new payment methods.

Buy now pay later isn’t for everyone, and you should carefully weigh the pros and cons before investing. However, by implementing the right payment methods and setting up responsible terms, retailers can both improve metrics such as conversion rate and AOV, as well as improving the customer experience. Creating this seamless ecommerce journey is a win for every party involved – including you.

 

About the Author

Eric Christensen is Chief Payments Officer at Digital River, a completely integrated solution for all the back-office functions of ecommerce. Digital River enables businesses to sell across the world with a single connection to the platform of your choice.

Business

THE EVOLVING TECHNOLOGY NEEDS OF THE FINANCE DEPARTMENT

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Jennifer Sims, Senior Consultant at Xledger

 

The world of finance software is evolving quickly, but with many new software contenders entering the market it can be a mindfield for organisations. Many finance teams are already using multiple accounting apps and software packages for bookkeeping, payroll and invoicing to service individual needs. Whilst it may work fine for now, this segregated approach isn’t sustainable for long-term growth. The world is swiftly moving to agile, automated ways of working. As a result, there is a growing need to choose suppliers that can fulfil multiple functionalities within the one platform.

Financial software is evolving at such a pace that it can be difficult to keep up. Changing up a finance solution is a big step and ease of migration can be a substantial factor in determining which solution provider to go with. But how do you choose a solution that will grow with your business and still offer something innovative in five or ten years down the line? The fear is always that non-techie organisations will end up falling behind, but in such a highly concentrated industry, how do you decide which solution would work best for you?

 

Cloud-first: the term that makes all the difference 

You could find a ‘cloud-based’ service with an application that comes with automated audit trails to make it easier to meet compliance and record-keeping obligations, for example. But for a solution to offer all of the many future benefits promised by the cloud, it needs to have been built specifically for a cloud environemt from the outset – ie. not an on-premise built system that has been later adapted. Cloud-first services (true cloud) were always intended to leverage economies of scale, cope with live updates, be accessible from anywhere with an internet connection, and to scale rapidly, to name just a few of the many benefits.

When we talk about innovation in financial technology, we’re not just talking about software that makes it easier for the financial controller to create reports. If eliminating reliance on Excel spreadsheets is the only tangible benefit you have to really shout about, you are missing out on the real deal. With ‘true’ cloud finance software the sky is the limit.

Finance and accounting technology needs to directly meet the needs of the finance function and support the wider business needs.  When looking at accounting software platforms you’d be hard pressed to find one that doesn’t now promise ‘cloud-based’ enterprise resource planning (ERP) capabilities. The cloud is nothing new, but it’s the way that a solution harnesses this environment that makes a real difference. And here is where there is a need to read between the lines.

 

Automate more with true cloud 

Historically, repetitive and manual tasks are typical of the finance role – from invoice postings to expense claims handling – these can overwhelm the finance team. Research by Xledger[1] has found that an enormous 91% of CFOs and finance decision makers are carrying out at least one of these repetitive tasks as part of their job. What’s more, senior finance leads are averaging a whopping 25 hours per week carrying out repetitive and manual tasks, compared with 15 hours for other finance decision makers.

A modern, true cloud finance system can enable your business to automate repetitive tasks and provide one source of truth so that teams can make informed business decisions that will help to scale a business. Bank reconciliation, dashboard creation and reporting are just some of the tasks that can be handled automatically.These capabilities are aiding overtasked finance teams and saving hundreds or thousands of hours a year.

Whilst different companies are at different stages in their digital transformation what is clear is keeping up with the latest technology is fundamental to the future success of an organisation.

Xledger is a true cloud finance solution. The basics include invoicing, robust general ledger accounting, detailed slice and dice reporting, purchase orders, billing, VAT reporting, and cash and bank payments. It also adds process and structure to the enterprise with procurement and inventory, budgeting and forecasting, and project accounting. Users are always on the latest version of the software and with regulation more stringent than ever today, Xledger is ISO 27001 accredited.

Choosing the right provider for your financial ERP solution comes down to whether it has the fundamentals right. When hosting all of your vital data in the providers’ own servers, it should evidence a highly tested security process that comes with backup services as standard.

As our demand for technology capabilities grows and as ERP models progress, innovation will become the structure for growth – and there is no end to the possibilities.

 

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HOW RETURNS ABUSE AFFECTS RETAILERS

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By Aaron Begner, EMEA GM at Forter

 

Accompanying the significant growth in ecommerce over the past 12 months, is the need for retailers to manage the impact of a growing array of fraud and abuse challenges. One type of fraud that can easily fly under the radar is the abuse of a merchant’s returns policies.

Returns abuse can be difficult to detect and prevent for retailers, as often it is a challenge to identify fraudulent behaviour vs. a ‘usually-good’ consumer trying to bend – but not break – return policies. Therefore, it’s often a challenge to identify how returns abuse actually affects retailers. Here are three of the biggest ways that returns abuse negatively impacts business.

 

Lost Revenue

The most obvious effect that returns abuse has on a business is lost revenue, which can be significant. Research indicates that returns abuse may be costing retailers up to $15 billion per year. When fraudsters purchase items with the intent of abusing returns policies, the retailer makes no profit. Furthermore, it stops legitimate customers from purchasing the items they want, as fraudsters who don’t want the items are moving them around.

Various types of returns abuse can profoundly damage retailers’ bottom lines. Some tactics, such as shoplisting, where fraudsters try to obtain a refund for a list of products listed on a perfectly valid receipt, yet that they never purchased to begin with, can significantly impact retailers’ bottom line.

 

Increased Operational Costs

Returns abuse doesn’t only affect revenue pertaining to the products themselves. There are also operational costs to consider. An increase in returns abuse will often lead to more consideration being put into checking every return, for signs of abuse taking place. This can range from missing tags to damage or wear on the product. This process can be time-consuming, meaning more resources might be necessary to continue operating in an efficient manner. Handling and warehousing costs can also begin to increase, with returned items becoming significantly less valuable.

 

A Poor Customer Experience

As returns abuse continues to increase, many retailers will feel pressure to tighten their return policies. This could range from reducing the allotted time for eligible returns, to only issuing store credit instead of cashback. In some cases, more extreme measures such as requiring a restocking fee for more expensive merchandise will be taken.

While these are all effective ways to help diminish the effect of returns abuse on retailers, they can also have an adverse effect on a retailer’s customer experience. If loyal customers have become accustomed to a more flexible and forgiving return policy, they could be taken by surprise when it’s more difficult for them to return their items.

Ultimately, it can be tricky to balance the two. Returns abuse negatively affects retailer revenue and the overall business, but so does a poor customer experience.

 

The Negative Impact of Returns Abuse Cannot Be Understated

Returns abuse is often overlooked. It can be difficult to detect, but significantly impacts revenue and operations. Because stricter return policies may restrict loyal customers, the reputation of a retailer’s business can be affected. Poor customer experiences can lead to bad reviews and a loss of current and potential customers. Because of this, returns abuse prevention should be a top priority for all retailers.

With this information in hand, retailers can get a better understanding of how returns abuse affects their business and why they need to put a prevention plan in place, as soon as possible.

 

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