BNPL Snowballs Through The COVID Economy

Payments choice is akin to a streaming music service: If you don’t like one selection, skip to a better one. It’s utterly consumer-centric – which, along with spend management, explains the core appeal of buy now, pay later (BNPL) alternative credit apps in any economy.

In a wrecked economy, however, the appeal of BNPL multiplies, as evidenced by the surge of new customers attracted to the various BNPL apps during the lockdowns.

“BNPL solutions are steadily gaining favor in the U.S. … as 30 percent of the nation’s consumers have such accounts. The payment method helps consumers afford big-ticket items as well as essentials like groceries, and financial hardships likely explain why demand for these services has ballooned during the health crisis,” according to the July Buy Now, Pay Later Tracker®, done in collaboration with Afterpay.

Controlling spend may be its own reward, and it can be a great deal more, with the BNPL experiences and integrations that have been making headlines during this troubled year.

Pandemic on a Budget

With U.S. unemployment at its worst in decades, a vast number of Americans are either living on government aid or stretching one salary to replace another that was lost. These economic conditions are energizing interest in BNPL for its likable installment payment model.

“Several BNPL players are gaining customers looking to keep tighter grips on their finances with flexible payment options,” per the July Tracker. “BNPL solution provider Afterpay recently onboarded more than one million U.S. users within a 10-week span, for example, marking a 30 percent to 40 percent increase in the number of clients added weekly compared to January and February totals. This occurred after the provider reported that it served 4.4 million U.S. customers in its fiscal quarter ending March 31 — up 283 percent from the same period last year. The company also saw its sales in the country hit $1 billion for that quarter.”

Nick Molnar, U.S. CEO and co-founder of Afterpay, told PYMNTS that the BNPL trend is “in overdrive” resulting from the pandemic. But it was trending already, he noted, and the longer-term view isn’t so much about COVID as it is about the consumer spending changes left in its wake.

“With this new face of retail emerging, it’s more important than ever that retailers offer a true omnichannel solution, both online and in-store,” Molnar said. “The most successful retailers, regardless of the type of merchandise and price point, are giving their shoppers several ways to shop across multiple channels, and they are offering payment options that speak to consumers’ desires for both flexibility and control.”

Luxury, Comfort Purchases Still Matter

If it seems like all is doom and gloom, fear not. Additional findings of the latest Buy Now, Pay Later Tracker® signal that healthy consumer appetites haven’t gone away – they’re just on a diet.

But almost no one sticks to diets, and neither will consumers, nonexistent job market notwithstanding. Studies consistently show that people still want to make their luxury purchases and own those status items – they just need some extra time to pay it off.

“Consumers are seeking BNPL solutions for more than just necessary purchases. A recent report found that 73 percent of U.S. consumers have experienced stress about purchasing expensive items,” the new Tracker states. “Yet 85 percent are interested in interest-free BNPL plans at their preferred retailers. BNPL has also gained a strong foothold among in the fashion world, especially among younger consumers.”