Retail Tech: Malaysian Consumers Are Looking for Ways To Stretch Their Budgets

Here’s how you can help your customers by allowing them to Buy Now and Pay Later

How does your e-commerce business deal with low conversion rates? You’ve no doubt tried a lot of different things, such as:

• Offering discounts, freebies and other attractive promotions
• Working on your SEO
• Revamping your product visuals 
• Making your copy more persuasive 
• And more

Does it ever end? 

But, it turns out these approaches focus mainly on you, not your customers. 

Have you also considered that financing may be what’s preventing your customers from clicking the checkout button? Especially in the past two years, when people across all ages began tightening their wallets due to financial uncertainties caused by COVID-19. Millennials in particular, have been the hardest hit. 

This change in spending behaviour led to the rise of Buy Now, Pay Later (BNPL), an alternative payment method that’s been trending globally for some time, and started gaining traction in Malaysia during the pandemic. Its rapid rise in popularity is also driven by a surge in e-commerce transactions as consumers spend much more time indoors.

Among the younger tech-savvy generation, BNPL is seen as a better alternative to traditional credit cards. And judging by its growth, it’s safe to say that it’s here to stay. A study by Coherent Market Insights estimated the global value of BNPL at USD7.3 billion in 2019, and this figure is expected to reach USD33.6 billion in 2027. During this period, APAC is set to be the fastest-growing region due to the increasing number of mobile Internet users in the region.

Locally, BNPL payments are expected to grow by 109.5% to reach USD601.2 million in 2022, according to Research and Markets. 

This facility is a tool worth considering to better serve your customers who want more payment flexibility without relying solely on credit cards. 

With BNPL, you can potentially boost your conversion rates by helping your customers ease their financial strain in three ways. 

1. Make it easier to buy your sought-after items

Some shoppers have wishlisted your products for a while but have yet to make a purchase. Chances are, they do want to buy, but are hampered by the financing options available to them.  

With BNPL, you can lower or even remove any buying hesitations for this segment of potential customers. The easy and convenient sign-up process, as well as minimal credit checks, allow them to buy first and spread out their payments in low monthly installments for smaller-ticket items. 

This results in a buying process with a lot less friction — instead of abandoning their shopping carts or going only for what they can afford to pay, these potential customers can go for what they really want. This gives them greater spending power without putting too much strain on their bank accounts. 

2. Help your customers avoid more credit card debt

In 2021, Malaysia’s Minister of Finance said 47 per cent of Malaysian youths have high credit card debts, citing a statistic by the Central Bank of Malaysia. 

While it’s easy to put the blame on negligence or low financial literacy, that’s not always the case. Many young Malaysians are also struggling with other key issues such as student loan debts, stagnant wages, job security and high cost of living. When you consider these issues, coupled with uncertainties associated with the pandemic, it’s easy to see why many young consumers are increasingly not in favour of plastic cash. 

With BNPL, you can help your customers avoid incurring more credit card debt and interest charges, as most of these point-of-sale loans are interest-free with no hidden costs — they are only charged a fee for late payments. And while credit card companies do offer zero-interest installment plans, the difference here is that consumers can utilise a BNPL facility without having to own a credit card.   

3. Help your customers potentially break free from the credit card debt cycle 

With credit cards, consumers are assigned a predetermined limit that puts a cap on their spending. However, these credit limits often run into the thousands, and it can be easy for shoppers to lose track of their expenses and potentially overspend if they’re not careful. There’s also the tendency for them to defer their payments, which results in more interest racked up along the way. It’s a vicious cycle that can be difficult to break.  

With BNPL, your customers have the option of a safer, more responsible form of consumer credit. Spending limits are typically capped at a few hundred ringgit for new users, and any increase will depend on the shopper’s repayment track record. Shoppers are also less likely to put off their payments and accumulate more debt, as their installments are due on a set schedule and automatically deducted from the debit card connected to their BNPL account. 

With this facility, you’ll not only be helping your customers free up their cash flow — you’ll also be helping them, indirectly, to be more accountable for their purchases. 

Your customers benefit more with BNPL 

You’ve run your business for years before BNPL existed, and you could probably continue serving your customers without offering this facility. But with changing consumer behaviour and an increasingly competitive marketplace, you might want to rethink your approach. 

Your customers’ needs are evolving, so an important question to ask yourself is what else can you do to keep them happy, particularly those in the lucrative millennial and Gen-Z market who are shaping the future of shopping.     

With the long-term financial impact of the pandemic, especially among the younger generation, e-commerce businesses that can help make life a little easier for its customers will be the ones that these customers stay loyal to.