For Main Street SMBs, BNPL Can Unlock New Consumer Spend

With make-or-break season approaching for retailers and small and medium-sized businesses (SMBs) looking for fresh ways to cash in on consumers’ return to physical stores, industry watchers say it’s not too late for shop owners to jump on the buy now, pay later (BNPL) bandwagon that’s already taken the world of online shopping by storm.

That’s according to Sezzle CEO Charlie Youakim, who makes the case that BNPL can not only drive sales among under-served consumers, but the fast-growing finance method can also increase traffic into physical stores.

Youakim told PYMNTS’ Karen Webster in an interview that BNPL products like Sezzle have the distinct advantage of being able to give consumers with low FICO scores access to the credit ecosystem.

“It’s almost like a creditized debit card in a way but it’s safe and predictable because of its planned-out purchases,” he explained. “We give access to typically lower-spectrum consumers. Our average customer is 50 percent below a 600 FICO, and 15 percent of our customer base has no FICO score whatsoever. So, it gives a bit of reach to these customers and allows them to get started again.”

Read more: Report: Offering BNPL Is Key to Unlocking Retail Spend for One-Quarter of US Consumers

Getting Started, Keeping Rolling

By giving consumers the option to buy now and pay later, Youakim says Main Street SMBs can generate additional sales they’ll otherwise miss out on. He said a lot of customers, even if they have the funds on them, decide against making a purchase simply because they have a need to stick to a budget. So, they think they’ll come back in a few weeks. But of course, few ever do come back.

“Having a BNPL option available for that customer allows SMBs to creditize that debit card,” Youakim said. “Customers transacting on debit cards are spending less and they’re also less likely to spend overall because they’re going to think about budgeting. If you can creditize that debit card through BNPL products you’re going to enable that purchase today.”

The bulk of BNPL’s rapid growth in the last two years has taken place in eCommerce, and within that segment, Sezzle has seen greater adoption with SMBs than with larger retailers. The company boasts of more than 40,000 active merchants, mostly online, and is now looking to extend into physical SMBs, which it sees as the next frontier for BNPL.

The Physical Frontier

Youakim told Webster he’s confident BNPL will grow just as fast in the physical space as it did online.

“When we started in eCommerce, we’d find a merchant that was willing to adopt it,” Youakim said. “What happened is that other merchants, competitors and friends alike, they noticed how it was increasing sales, so they adopted it too. I think the same thing will happen in the physical space.”

Sezzle is already beginning to push into that frontier, he said, and as stores in retail environments put up sign stickers advertising BNPL, that will start conversations within malls and the concept will start to proliferate

“I think it’ll be the exact same sort of situation, maybe like another two- or three-year time period,” he said.

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Asked by Webster why he’s so confident of that outcome, Youakim said the numbers speak for themselves, noting that Sezzle has seen virtually no churn whatsoever among its merchant base. SMBs also have the advantage of being able to adopt BNPL extremely rapidly.

“The one advantage that SMBs typically have is they can implement quickly. In our online situation, we can get a merchant live in 24 hours,” Youakim said. “It’s really easy for a merchant to get live with us in the offline world too as it’s same sort of scenario. It takes a little bit longer to get the signage and stickers out, but to get you live, it’s just a matter of tapping terminals in your store, letting us know where they are and what they are, what the terminal IDs are and you’re live.”

Youakim further highlighted BNPL’s potential to drive additional traffic to physical stores, thanks to the Sezzle store directory that’s used by more than 3 million active customers to look for other locations near them they can utilize.

More than anything else, Youakim said, SMBs can benefit by being among the first to serve consumers who’ve been locked outside of the traditional credit ecosystem.

“There are plenty of people who have gotten on the wrong side of things, but they’ve figured things out,” he said. “These people are deserving; they just need a second chance.”