Over the past few years, the concept of “Buy Now, Pay Later”(BNPL) has grown in popularity. Retailers are using platforms like Affirm, AfterPay, Klarna, and PayPal Credit to allow customers to buy everything from a Peloton to a pair of jeans. And consumers are responding positively: according to a recent study conducted by PYMNTS and Sezzle of 7,000 U.S. consumers, 73% of customers who have used BNPL say they are more likely to shop at retailers who offer that option in the future.
Analysts and industry leaders alike anticipate BNPL is here to stay. So how should more traditional financial institutions incorporate the lessons learned from BNPL into their long-term strategies?
At g2o, we have been closely monitoring this payment method and its impact on our financial services clients. As we near the 2021 holiday season, we anticipate BNPL will gain even more traction. To help organizations prepare, we wanted to share our perspective on BNPL through a series of blogposts.
Let’s start by exploring why BNPL is gaining momentum in the market:
1. It Circumvents Credit Challenges
BNPL offers a variety of benefits for those who fall into the category of “less than pristine” credit. Users can spread payments over a certain period, with no interest accrued. It therefore gives individuals the ability to make more expensive purchases without feeling intimidated by a lump sum payment or racking up interest or debt. This benefit is enticing even to consumers who simply want to cut their spending each month, allowing customers who can pay for items outright to flatten their monthly spend.
2. It's Trendy
Social media platforms like Instagram, Twitter, and TikTok are becoming flooded with advertisements to check out these payment alternatives. CNBC interviewed seven Millennial and Gen-Z BNPL users who stated they were influenced by peers or social media to use the method. Plus, younger generations are seeing their peers and influencers purchase previously unaffordable items. BNPL gives these individuals a viable option to purchase pricey goods without incurring debt.
3. It’s Fast, Easy, and Convenient
Many retailers now offer BNPL platforms as part of the check-out experience. It’s simple for customers to select that option, and research shows if a platform is offered, consumers are more likely to utilize it. You don’t have to go searching for your wallet or check your credit balances before purchasing. You can simply select the option and it functions just like a credit card, without the interest. Not only is it right there at the click of a button, but the financial convenience also makes it worthwhile.
BNPL Has Staying Power
Given BNPL’s benefits to consumers, it’s easy to see BNPL is here to stay. Traditional banks and financial organizations must find a way to incorporate the impact of BNPL into their strategies.
g2o is here to help. We have been working with clients to develop solutions aimed at maintaining market share by mitigating the impact of BNPL or developing their own versions of BNPL. Visit the other two articles in this series, The Increasingly Important Impact of Buy Now, Pay Later and Buy Now, Pay Later is Only the Beginning - The Next Wave of Financial Disruption is Clear for more information on the impact of Buy Now, Pay Later on traditional Financial institutions.
Want to talk about how your financial organization can implement Buy Now, Pay Later or other solutions to improve your Customer Experience and bottom line? Contact us to learn more.