The buy now, pay later BNPL boom is on the verge of being vilified. The idea of “phantom debt” continues to become an emerging issue in the consumer credit market (impacting platforms like Affirm, Klarna, Shop Pay, Apple Pay, and others).
Now, nearly every major retailer has partnered with a company or companies on Buy Now, Pay Later, or BNPL, products — online and, in some cases, even in stores. “The main thing at the end of the day is just the competitive effects,” deHaan said. “If Walmart — just to throw out some names — starts accepting BNPL, then Target has to do so as well, because we see that BNPL is a favored product and consumers will change their behaviors to shop at places that offer it.”
Reports like the above from the Gothamist give the impression that the spread of BNPL is a negative. However, store credit cards maintain positive press. Adjacently, branded digital payments are the white space according to our recent analysis. With Tandym leading the charge and two other enterprise SaaS companies developing similar products, it begs the question. When will Shopify react to the digital branded payments space? The following is complete conjecture but don’t be surprised if Shopify eventually warms to the idea.
Prediction: It wouldn’t surprise if Shopify introduced an upgrade to Shop Pay in 2024, targeting the elite top 0.01% of brands on its platform. I would classify those with $250M+ in annual revenue. This particular upgrade concept would revolve around enabling these premier brands to white-label Shop Pay as their own branded payment system. This would allow this select few retailers to issue brand-specific payments, a move that promises to deepen retail’s reliance on Shop Pay while offering enterprise DTC-level companies a new way to stand out on the Shopify platform.
This tier for qualified, enterprise retailers and marketplaces would enable these leading brands to craft personalized payment experiences and new, loyalty-driven value propositions that resonate with their distinct brand identity and customer base, transforming the payment process from a transaction into a key element of the brand experience. And it could be built atop of the Shop Pay platform with (I assume would be) relative ease. By injecting their identities into every step of the purchasing process, brands can forge a stronger emotional bond with their customers, enhancing loyalty and engagement.Below is an example from a previous ad with Tandym. Whether through acquisition or imitation, eventually Shopify will offer this as a service.
The introduction of brand-specific debt is not revolutionary, you likely have 2-3 brand credit cards in your possession. But a digital-first system for it has proven to be early in its lifecycle. Trusted brands (Solo Brands is the one used, above) could offer exclusive financing options and loyalty options akin to earned sophisticated store credit, fully integrated within the brand’s Shopify ecosystem. This could include interest-free periods, exclusive rewards, or special access to products and events, incentivizing deeper customer engagement, fostering brand loyalty, and boosting the lifetime value of each customer.
This acquisition or development cycle by Shopify would set a new standard in the eCommerce industry, prompting other retail platforms to adopt similar strategies. For consumers, this could translate to a more tailored and engaging shopping experience. Incorporating the benefits of store credit cards, Shopify’s highly-selective, customized approach to Shop Pay would reward customer loyalty in ways that help retailers address one of the industry’s most important metrics: LTV. And, it would move Shopify closer to the financial technology category that the wider market seems to reward.
While I assume that this idea is not currently in Shopify’s development pipeline, a custom version of Shop Pay for trustworthy brands (with verifiable brand equity) would be a welcomed addition to the DTC marketplace. While BNPL struggles with damaging press, products like Shop Pay could benefit by equipping a select few individual retailers to be the faces of one-click payments and potential payment plans. And as a second-order effect, it may attract more enterprise level companies looking for new opportunities to build loyalty and new lines of revenue.
By Web Smith