As part of our effort to build a best-in-class Buy Now, Pay Later (BNPL) solution, we reached out to leaders at several Fortune 500 retailers to gather their views on the increasingly popular payment option. We found that many business executives are taking a thoughtful approach to BNPL — and rightfully so: Implementing a payment process is an important decision for any business, big or small. Here are four considerations that are top of mind for these industry-leading merchants.

“Approval rates are important. They shouldn’t be a source of friction.

BNPL providers deliver an accept or decline recommendation as part of the checkout process. If the transaction is approved, merchants receive upfront funding for the full purchase amount and the BNPL provider takes on all the risk associated with subsequent payments.

Executives we spoke to understand that BNPL providers need to be careful about which transactions are approved — but if consumers are declined too frequently, it creates an unfavorable experience that can harm the merchant’s brand. As such, merchants are focused on partnering with BNPL providers with finely-tuned risk models designed to properly identify instances of account abuse and fraud, while also readily approving qualified buyers — all in a matter of seconds.

“BNPL needs to generate proven incremental gains in key metrics, like new buyers, basket size and conversion.

Merchants are charged a fee on each BNPL transaction. Business leaders told us these costs must be justified by a meaningful improvement in their core performance metrics, such as repeat business, cart abandonment and average order value. Executives are also focused on new consumer growth, especially when it comes to capturing Gen Z buyers. Digital-first shoppers are a major catalyst for the exploding popularity of BNPL — and retailers recognize that if they want to appeal to this demographic, then a successful BNPL service is a must.

“Customers need to be educated about the product. It’s essential to avoid issues around affordability and related risks to brand reputation.

It’s true that BNPL services offer consumers increased choice and access to unique features and benefits. In fact, BNPL is often positioned as a convenient budgeting tool or a way to make purchases more affordable.

As with all financial products, there are potential drawbacks. Most BNPL providers charge fees to consumers for missed payments. Consumers can also overextend themselves financially after engaging in multiple BNPL arrangements or have difficulty keeping track of the various payments. Additionally, returning merchandise bought with BNPL can sometimes be complicated.

As a result, it’s important for providers and merchants to work together to create an environment of trust and transparency.

“The checkout process shouldn’t look cluttered. We don’t want to see brands and logos competing with our own.

Many BNPL providers engage in a range of consumer acquisition and engagement tactics, like promoting shopping directories and redirecting consumers away from merchant sites to their own virtual card payment option, which drives purchase intent away from the merchant. It’s also common for BNPL providers to pull consumers into their own loyalty programs to increase stickiness to the BNPL brand — often at the expense of the retailer’s private-label card and loyalty program. Essentially, merchants must hand over the keys of the consumer journey and lifecycle to another company.

Many of the brands we spoke to were relieved to hear about an alternative option: White label functionality. Using APIs and developer tools, businesses can deploy their own merchant-branded BNPL option, allowing them to retain ownership of the consumer relationship.

To learn more about our Buy Now, Pay Later solution, click here or contact us at 1-877-CERTEGY.