Retailers around the world are always looking for ways to improve their sales. Many are considered innovative, offering competitive pricing and using direct-to-consumer business models that remove unnecessary processes involved in selling goods through distributors. For startups, it can be challenging to do this: they may not have the workforce or capital to establish a strong brand or a unique selling proposition to make shoppers want to buy online.
One source of revenue that has been a big part of the growth in e-commerce is recurring payments, particularly those that offer delayed payment options such as Klarna, Afterpay and Affirm. While these range from primary delayed billing platforms to more robust lending platforms, they provide retailers with an easy way to offer options for shoppers who may not have the cash on hand but want to make a purchase.
Klarna
The primary delayed billing option, called “Klarna”, uses a shopping cart service that allows customers to select how many instalments they want to pay for their goods, as well as the due date. The customer then gets an email notification with a link to a payment page, and Klarna pays the retailer once the order has been confirmed. The company initially offered this service in Sweden in 2005, but it has since expanded to include merchants in the United States, Germany, Austria, the Netherlands and Belgium.
The company has been increasing, with $2.3 billion in gross merchandise volume in 2017 and is currently the most significant payment solutions provider in Europe. In addition to the delayed billing service, Klarna also offers a “buy now, pay later” option where customers can receive the goods before they have to pay for them and the opportunity to pay over time with Klarna financing. While Klarnas’ main product is delayed billing, they also offer other services such as “cart abandonment protection”, which collects payments for abandoned shopping carts before the cart is abandoned.
This type of payment service has offered significant benefits for retailers in Europe and around the world, making it easier for shoppers to buy goods from smaller retailers, who may not provide credit card or PayPal payment options. In an interview with Retail Dive, Mike Lemberger, Klarna’s executive vice president of business development in the United States, said, “We’re trying to make shopping online more fun and easy [for shoppers]. [In Europe], many companies are good at e-commerce, but the payment process can be a little bit of a hassle. We’re trying to make it as smooth as possible.” Klarna has also partnered with several “marketplace” platforms such as Shopify and Magento, which allows retailers to offer Klarna’s services without having to do any coding.
Affirm
Affirm is another major player in the “delayed payment” industry, offering retailers a way to accept delayed payments for goods. Affirm was founded by PayPal co-founder Max Levchin, who provided consumers with a more accessible online market without using credit cards or debit cards. Instead, shoppers are given the option to pay for their purchase over time, with Affirm offering interest rates typically lower than those of credit cards.
Affirm offers a few different payment options: shoppers can either pay for their purchase in full at the time of checkout or choose to spread out their payments over some time. In addition, Affirm offers a “buy now, pay later” option where customers can receive the goods before paying for them. Affirm also provides several financing options, such as “installment loans” and “line of credit loans”.
While Affirinstalmentble in several different countries, it’s important to note that their services may not be available in every country. For example, shoppers in the United States can use Affirm to buy goods from retailers in the United States, Mexico, Brazil and the United Kingdom. Still, shoppers in Canada cannot use Affirm to buy goods from Canadian retailers.
Afterpay
Afterpay is another payment service that offers delayed payments for goods and is available in the United States, Australia, Belgium, Canada, Denmark, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway and Spain. Afterpay allows customers to create an account and select a payment plan for their purchase. Customers can choose to pay for their purchase in full at the time of checkout, or they can choose to spread out their payments over some time. Afterpay also offers a “buy now, pay later” option where customers can receive the goods before paying for them.
Afterpay has snowballed, with over 1.5 million active users in the United States and Australia. In an interview with Retail Dive, Afterpay CEO Nick Molnar said, “We are pleased with the growth that we see in all our markets, but the U.S. and Australia continue to be our biggest markets by a significant margin. We think there is a lot of potential for continued growth in both markets.”
All three of these companies offer retailers a way to increase sales by allowing customers to buy goods without using a credit or debit card. In addition, all three companies provide retailers with a way to increase customer loyalty by offering “buy now, pay later” options. Finally, all three companies provide retailers with a way to increase customer engagement by allowing customers to receive the goods before payment.
The company that is the best option for your business depends on several factors, such as the size of your business and the countries where you do business. However, all three companies can offer retailers a way to increase their sales and improve their bottom lines.
The delayed payment industry is increasing, with Affirm offering “instalment loans” and Afterpay offering “line of credit loans”. Klarna provides the best option for businesses looking to attract repeat customers by allowing shoppers to create accounts and pay for goods over an extended period, with no interest charges.
Afterpay and Affirm both offer lower rates than credit cards, but neither is as good as Klarna if you want to attract loyal customers who pay for multiple orders over a long period. Choose either Afterpay or Affirm if your customer demographic leans toward young people and those with lower credit scores. Affirm offers a “buy now, pay later” option where customers can receive the goods before paying for them. In contrast, Afterpay and Klarna offer delayed payment options that do not require customers to purchase before making payments.