Rethinking the customer journey – reducing cart abandonment

With the high cost-of-living continuing to affect consumers and retailers, and the lack of spending having a knock-on effect on growth, retailers must seek to innovate around the customer journey.

Recent research shows that 52% of consumers in the UK cut back on non-essential spending in the first quarter of 2024, with the most common cutbacks being eating out (72%), clothing (62%), and takeaways (58%). Naturally, non-essential items are the thin end of the wedge when it comes to household spending, so there is also a great opportunity for retailers to provide assistance around more essential goods and service, such as groceries and energy, as well as those that sit somewhere in the middle, such as cars, white goods, home improvements, and gym memberships.

Trends identified across the customer journey, particularly those relating to online cart abandonment, reveal that retailers need only adjust the way they incentivise customers in small but significant ways to increase conversions at checkout, but this approach alone will not enhance customer engagement in the long term.

Consumers prioritise their spending based on many different factors, but the common problem they face is a lack of options when it comes to making a purchasing decision. This is where retailers have the opportunity to end the binary nature of that decision—i.e. purchase on the day or abandon entirely—and enhance the customer journey through finance models that deliver flexibility and reward loyalty.

Enhancing the customer journey with embedded finance

Most shoppers today are aware of embedded finance options through ‘buy now, pay later’ (BNPL), with BNPL finance credit models such as instalments (‘pay-in-x’) and ‘deferred payment’ models the most popular options. According to the Financial Conduct Authority, 27% of adults in the UK used BNPL at least once in the six months to January 2023, with the majority (39%) of users belonging to the 25-34-year-olds age bracket.

As shoppers move online and away from physical stores, strategies for improving customer engagement across digital channels, and reducing cart abandonment must be a priority for retailers.

Let us examine the challenges of fashion eCommerce. In this sector some 62% of shoppers are cutting back on their spending on clothes and data shows that online cart abandonment is high. With 77% of orders made on mobile devices not completed, better financing options are clearly a viable means of increasing conversion and customer engagement.

An effective way to encourage customers to explore embedded finance options is through exit intent strategies at checkout. An example of this is to remind them of payment integrations or flexible BNPL options once they view their full basket—especially as the total may be beyond their initial planned spend.

NatWest Boxed research conducted with BCG has revealed that embedded finance options are indeed driving better outcomes, with fashion retailers seeing a ~10-15% increase in checkout conversion and as much as a 30% increase in average order values—with similar boosts reflected across other sectors.

Increasing customer engagement and loyalty

While incentivising customers to complete purchases with embedded finance options is a proven method of driving conversion, more still needs to be done to grow customer loyalty and drive repeat business.

A strategy focused on customer lifetime value (CLV) and the ways in which the retailer can add value across this timeframe is essential. Good CLV strategies will ensure a healthy and mutually beneficial relationship, ensuring loyalty through fair value exchange, rewards and benefits.

Retailers understand the value of rewards schemes and loyalty programmes. From supermarkets to homeware stores and restaurant chains, consumers today regularly build in-store credit and rewards points through subscription services that are accessible via digital wallets. Some retailers also offer ‘store of value’ options, in which regular customers preload accounts and receive benefits on ongoing expenditure, or bigger discounts on high-value purchases. An example might be supermarkets that offer consumers free delivery for their orders as they regularly spend a certain amount every month.

Combining rewards and loyalty schemes with embedded finance and customer data is another way of enhancing the customer journey. Shoppers want more flexible and seamless ways to pay, to be rewarded for loyalty, and receive meaningful services and value adds. One of the ways to add this value is to offer more personally targeted financing options.

With customer buy-in around data-sharing, retailers can establish valuable relationships with customers that allow them to support key purchases. For example, a department store retailer might build in engagement triggers and more favourable embedded finance options or discounts for customers between the ages of 25 and 42, who are regularly browsing the childcare and home improvement sections on their website. The customer’s decision to opt in to data sharing then becomes a beneficial value-add that helps the retailer serve their needs, while also ensuring they do not need to look elsewhere for the same products.

By blending embedded finance offerings and rewards that seek to maximise the customer lifetime value, retailers can shift to a new model that ensures long-term profitability, growth and loyalty over short-term gains.

About Tom

Tom Bentley is the head of Growth for NatWest’s banking-as-a-service (BaaS) venture, NatWest Boxed, delivering embedded financial services for the UK’s best brands, retailers, e-commerce and fintech platforms.

Tom has spent more than 15 years working across the banking and financial services sector before becoming one of the leading experts in Embedded Finance. Previously Tom was the Chief Commercial Officer at Vodeno, Sales Director at Thought Machine and held executive roles at banking software company Temenos, across Asia and Australia, collaborating with some of the most disruptive fintechs in the world.