Retailers are clamouring for high-quality BNPL and checkout finance solutions to help prevent a decline in consumer spending and drive new customer acquisition

Retail finance gives customers more buying power, thanks to the ability to spread the cost of purchases. Not only does it help consumers buy the products they desire, it also enhances customer loyalty and supports the bottom line.

But while retail finance is essential among successful eCommerce brands, there are several growing consumer and product trends which merchants need to be aware of as we enter 2023.

BNPL rose to prominence during the pandemic as consumers with tighter wallets looked for alternative funding methods. But the current economic outlook is challenging for many merchants both in terms of the short-term impact of the current economic climate, but more longer-term demographic trends we are seeing.

Five key consumer finance trends merchants need to address in 2023

Trend one: Inflation

There is no doubt that the cost-of-living crisis is now directly impacting consumer buying patterns. Brits are tightening their purse strings to pay for the rising prices of items such as food and fuel, leaving them with less disposable income to spend on non-essential items. Businesses are expected to feel the effects of this, from cutting down on TV streaming services to foregoing a favourite coffee at a local café, people are expecting to significantly change their spending patterns when it comes to non-essential items over the next 12 months. According to a recent report by the Direct Marketing Association 51% of consumers are looking at deals and offers, often leading them to change their traditional buying behaviour. For merchants trying to retain a healthy level of consumer demand, especially those offering higher value products, the need to offer a flexible BNPL solution will be even more important as consumers look to spread the cost of more purchases over time.

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Trend two: The rise of intentional spending

One of the resulting global trends in consumer buying patterns is the rise of what is being termed intentional spending – the action of making purposeful purchasing decisions that live up to financial goals and personal values. In practice, this means a decline in instant gratification buying, and more longer-term thinking when it comes to researching and planning buying options. Central to this new consumer is to find key non-discretionary lifetime purchases that are both durable and sustainable. One clear example is solar panels – a high-ticket value item with a financial imperative for addressing energy costs, but one which at the outset requires flexible financing options.

Trend three: Diversified lenders

The modern eCommerce market has evolved to offer consumers faster, simpler, and more secure payment methods. However, despite the now seamless nature of transactions on merchants’ apps and websites, there’s no one-size-fits-all solution when it comes to finance and credit options. The key for merchants then is being able to offer finance options which provide the broadest coverage for their customers’ needs, maximising the opportunity for revenue generation and protecting brand loyalty.

The credit market is like any other market. The more universal it is, the more consumers it will welcome. As a result, we believe merchants need to offer truly flexible BNPL credit options that harness a wide range of lenders to better cater to individuals and their circumstances.

Trend four: the rise of Gen Z

A once in a lifetime generational shift is now taking place with the use of credit cards in decline and a migration taking place toward alternative checkout finance-based payment methods. This is most pronounced amongst the millennial and Gen Z age groups.

According to a recent survey less than half of Gen Z consumers have a credit card. This demographic change is stark when you compare it to penetration levels amongst older age groups. 61% of Millennials, 65% of Gen X, and 81% of Baby Boomers are all reported to carry at least one card.

This increased uptake for BNPL is unsurprising and it is coming from younger consumers who are largely rejecting credit cards, and accessing borrowing directly at checkout, where they value its flexibility and alignment with their shopping objectives. Adoption rates among Gen Z are expected to increase from 36.8% in 2021 to 47.4% in 2025, confirming this is a trend to watch.

Trend five: The rise of multi-lending

The final key trend expected throughout 2023 may well be the rise of multi-lending options for BNPL providers. Many pure-play BNPL lenders are pivoting to offer additional financial products or marketplaces to make the most compelling pitch to customers.

Merchants will leave sales hanging if they don’t offer some form of short lending solution to their customers. For the merchant, it means that there are a lot of shoppers that want to use the service but are getting denied credit.

At best, that’s a bad experience for consumers but that actually translates to lost sales. The logical solution to this is to offer a wider variety of BNPL options at the checkout. However, if each solution comes with its own button, the checkout gets pretty crowded and confusing quite quickly. This is why a comprehensive BNPL platform should be considered by all merchants in 2023.

Despite high inflation and concerns about a potential recession, shoppers still significantly spent online on Cyber Monday and Black Friday, thanks in part to buy now, pay later (BNPL) solutions. But as inflationary pressures persist, consumers are responding by looking to make their money go as far as possible and towards the things that matter. As we move into 2023, merchants need to respond accordingly, giving shoppers flexibility and convenience, by offering flexible BNPL and checkout finance options that open up access to a greater number of prospective buyers, across online and in-store channels, and even for higher value, more considered purchases.