Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Buy Now Pay Later to Lift Conversion
Transcript
- Lucas: So we talk a lot about reducing friction in the checkout process, but one of the biggest friction points has always been the payment step itself — especially the moment when the customer sees that full total and hesitates. Luna: Right, and that's where buy now pay later has really changed the game for DTC brands. I mean, it's gone from a niche fintech perk to almost an expected option. Lucas: Exactly. By mid-2026, BNPL is projected to handle more than twelve percent of all global e-commerce transactions. And for DTC brands specifically, it's becoming a core marketing lever, not just a payment method. Luna: Can you give an example of a brand that's using it strategically? I know Warby Parker and Allbirds have been early adopters, but what are they doing beyond just adding the button? Lucas: Sure. Take Warby Parker — they offer Klarna at checkout, but they also promote it in their email flows and on product pages as a way to lower the perceived price point. The typical average order value for a BNPL user is about thirty to forty percent higher than a standard credit card user. Luna: Because people feel comfortable adding an extra item when they can split the payment across four installments. Lucas: Exactly. And that's a big reason brands promote BNPL in their marketing. Some even run campaigns specifically targeting BNPL users — like 'free shipping on orders over fifty dollars when you pay with Afterpay'. Luna: So it's not just about reducing cart abandonment, which is obviously huge — Baymard Institute still puts the average abandonment rate above seventy percent — but it's also about increasing the basket size. Lucas: Right. And there's a conversion lift too. Multiple DTC brands I've spoken with internally report a fifteen to thirty percent increase in conversion rate just from offering BNPL at checkout. That's not incremental — that's a step change. Luna: But isn't there a catch? The brands have to pay merchant fees, typically around two to six percent of the transaction. That cuts into margin. Lucas: It does. But the trade-off often works because the increased conversion and average order value more than offset the fee. Plus, you're acquiring customers who might not have converted otherwise — especially younger shoppers who are credit card averse. Luna: And that's the audience a lot of DTC brands are targeting. Gen Z and millennials are far more comfortable with BNPL than with traditional credit. Lucas: Yeah, and that's where the marketing angle gets interesting. Some brands now create dedicated landing pages that highlight BNPL options. They position it as a budgeting tool: 'Get what you need now, pay over time with zero interest.' Luna: It's almost like a value proposition on its own. 'We make your purchase manageable.' Lucas: And I think the next frontier is using BNPL data to inform retargeting. If someone starts a checkout flow but drops off after selecting BNPL, you can retarget them with a specific message about the installment plan. Luna: That's smart. You already know they're interested in the payment method, so you can remind them that it's still available. Lucas: Right. And by the way — if these kinds of marketing strategies are valuable to you, you might be one of the listeners who help keep this show going. A handful of people chip in monthly on buy me a coffee dot com slash fexingo, and that honestly covers the hosting costs and research time that goes into episodes like this. Luna: Yeah, it's a small community that makes it possible to keep the show ad-free. So if you're finding ideas you can actually use, consider joining them. Lucas: So back to the data angle — one thing I've seen work really well is A/B testing the placement of BNPL messaging. Some brands put it right below the price on the product page, others wait until checkout. Which one converts better? Luna: Interesting. What have you found? Lucas: It depends on the price point. For items over a hundred dollars, showing the BNPL option — like 'or four payments of twenty-five dollars' — on the product page can lift add to cart rates by ten to fifteen percent. For lower-priced items, it's more effective at checkout. Luna: Because at lower prices, the friction isn't as high, so you don't need to pre-sell the payment option. Lucas: Exactly. And there's also a seasonal component. During the holiday season, BNPL usage spikes because people want to spread out gift purchases. Brands that promote it heavily in November and December see the biggest lifts. Luna: So you're saying marketing teams should have a BNPL campaign ready for Q4, separate from their general holiday promotions. Lucas: Absolutely. And some providers — like Klarna and Afterpay — have their own marketing tools, like shoppable directories or influencer partnerships, that brands can tap into. It's almost like co-marketing with the payment company. Luna: I've seen Afterpay's 'Afterpay Day' events where they feature deals from participating brands. That's a whole additional traffic channel. Lucas: Right. So it's not just a checkout feature; it's a distribution channel. The BNPL provider brings a customer base that is already comfortable with the installment model. For a DTC brand, that's a warm audience. Luna: What about the downsides? I feel like there's been some pushback on BNPL encouraging overspending and debt. Lucas: That's a real concern. Late fees and revolving debt can hurt consumers. But most BNPL providers now cap late fees and offer transparency. And from a brand perspective, responsible marketing — like clearly showing terms and not targeting vulnerable audiences — is important to avoid backlash. Luna: So it's about balance. Use BNPL to reduce friction, but don't disguise the cost. Lucas: Exactly. I think the smartest DTC brands are the ones that treat BNPL as one part of a broader payment experience — alongside options like PayPal, Apple Pay, and traditional credit cards. The key is offering choice without overwhelming the customer. Luna: And one more thing — how is the technology evolving? I know some BNPL providers are now offering virtual cards or buy now pay later for in-store purchases via QR codes. Lucas: That's true. As BNPL moves into physical retail, DTC brands with pop-up shops or brick and mortar presences can offer the same installment options in person. That creates a consistent experience across channels. Luna: So the takeaway for marketers: don't just add the BNPL button and walk away. Promote it, test it, integrate it into campaigns, and watch the conversion and AOV data. Lucas: Exactly. And if you're a DTC brand that hasn't tried it yet, the data is pretty clear that it can move the needle. But the execution matters — where you place the messaging, how you frame it, and which provider you choose all affect the outcome. Luna: Thanks, Lucas. This was a great deep dive into a tool that's often overlooked in marketing strategy. Lucas: Glad you found it useful. Next time we might look at the flip side — how DTC brands are using loyalty programs to reduce their reliance on BNPL for retention. Luna: Looking forward to it.