BNPL and Small Business: an essential collaboration for business growth  

By Rich Bayer, below, UK & EU Country Manager, Clearpay

Predictable consumer patterns are a thing of the past, thanks to the pandemic and the uncertain economic climate. Thankfully, innovative fintech providers are well placed to offer retailers future-facing digital solutions so they can adapt quickly to meet consumers’ needs.

Adapting quickly is critical for small and medium-size businesses (SMBs). Not only are they vital to the UK’s economy, employing 48 per cent of the population and generating 34 per cent of the nation’s total turnover in 2022, but because of their nimble operational models, they are among the fastest to adopt new technologies such as Buy Now, Pay Later (BNPL). Digital payments are shaping how consumers interact with their finances, so it is important that fintechs providing solutions for SMBs actively seek out opportunities to help them maximise growth and efficiency – and delving into relevant data and insights is a good place to start.

A new generation means new payment preferences

Younger generations have very different attitudes towards traditional payments. They watched the effects the 2008 financial crisis had on their parents’ generation and now they’re dealing with an unpredictable economic climate. Their money management preferences are unique.

Especially notable is their marked preference for favouring of debit over credit. 47 per cent of people under 35 now do not own a credit card, a strong decrease when compared with the 39 per cent reported in 2016. In place of credit cards, solutions like BNPL are growing in popularity, with March 2023 spending figures showing how 14 per cent of all purchases online involved BNPL.

Data is power

SME Publications/ SME XPO 2024

It is more important than ever that SMBs have access to tools that offer insights into consumer trends and adapt their payment offerings accordingly. Real-time data offered by fintechs gives merchants exclusive insights so they can track and optimise performance for growth. Layer on top of that the research that is being undertaken so that fintechs can truly understand a new generation of younger consumers, and SMBs have at their fingertips invaluable information that can help shape how they promote their business.

The data generated by our research for the festive period last year, for example, revealed that one in five Millennial and Gen Z shoppers considered buying gifts from retailers that they had not previously thought of thanks to their offering of BNPL services. These insights make partnerships with fintechs such as BNPL providers an invaluable resource for SMBs.

Marketing isn’t a luxury – it’s mission-critical

Offering a choice of payment options at checkout helps cater to consumer spending preferences, but attracting customers is another essential piece of the growth puzzle. SMBs are often the first to bear the brunt of tough economic headwinds – for instance the findings of our report ‘Moving Forward in 2023’, produced with Small Business Britain and Square, shows that a third of SMBs are expected to delay their marketing spend this year, and 27 per cent have already chosen to cut it substantially.

Marketing is indispensable for SMBs looking to increase their customer base, and those looking to cut costs need to do this within tight margins. Our research report recommends that low-cost marketing tools should be utilised to reach new customers, for example brand collaborations and social media platforms. Payments providers can also help with these efforts, and become strong, proactive partners who add real value.

With a growing number of consumers starting their shopping journey through apps and other digital platforms, SMBs need to consider how to maximise visibility and gain access to these newly digitalised consumers. For example, our own Shop Directory refers more than a million customers globally to its retail partners on a daily basis.

Integrating online flexibility with in-store experiences

Brand identity is another key factor for SMBs deciding which channels to prioritise when reaching customers. Many rely on in-person shopping experiences to engage with customers and expose them to their brand identity, while others prefer to do so through exclusively virtual mediums.

Developing integrated digital and in-person capabilities has become essential for customer satisfaction. They expect the same level of service whether they are shopping online or in-store, and differentiating factors such as being able to access their preferred payment method wherever they choose to shop is a contributing factor in converting a sale.

Our integration with Square, for example, has allowed these sellers to provide this ease, with customers now gaining access to BNPL services that enable seamless payments.

Whilst our ‘Moving Forward’ report shows that the majority of businesses think they will grow this year, there are still challenges to confront – almost a fifth (17 per cent) of small businesses have delayed their expansion plans for 2023. Avenues of growth via partnerships with fintechs is one way to integrate innovation with traditional commerce, which can be a lifeline for many small businesses.

A smart partnership for success

For SMBs to thrive, reliable data provided by fintech partners can be an indispensable source of insight for SMBs to help them shape their decision making. Evidently, there is also a mutually beneficial relationship whereby BNPL providers can inspire customers to shop with new retailers and consequently expose SMBs to a wider range of customers.

With ongoing financial challenges for consumers, giving them flexibility and choice so they can manage their spending and be financially empowered must remain at the centre of the collaboration between BNPLs and small businesses, which in turn will help deliver positive and meaningful results for the retail sector.

SME Publications/ SME XPO 2024