Buy Now, Pay Later: 5 Fast Facts

The buy now, pay later (BNPL) movement has accelerated at blazing speed in the last couple of years, quickly becoming a staple method of payment for merchants and consumers alike. It’s gaining ground online and off and is enjoying strong momentum, especially with the younger demographic, though older generations certainly aren’t turning a blind eye.

PYMNTS dug into some of the data it has accumulated over the past couple of years to find out the what, where and why behind this new payments phenomenon, and it’s apparent that consumers like a lot of things about BNPL no matter what their financial status might be. And digital payments providers feel the same way, with most major players scrambling not to be left behind, if they’re not already in.

Businesses are embracing the change too, with many looking to implement BNPL options in their physical stores.

1. BNPL Has Grown 85 Percent In 15 Months

The most telling statistic of all is often the most simple one, and it certainly holds true with BNPL, which has seen its user base grow an impressive 85 percent in the last 15 months. Looking back to PYMNTS’ March 2020 PayPal Credit Economy Survey, we saw BNPL already had a strong user base at that time, with 15.4 million consumers acknowledging they had used the payment method at least once in the last 12 months.

Since the emergence of the COVID-19 pandemic, BNPL has only gone from strength to strength with millions more now using it for their purchases. That became clear from our June 2021 Amazon Web Services Survey, which revealed the number of consumers using BNPL to buy products and services in the last year had jumped to 28.5 million.

See more: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit

2. It’s Flexible, Easy And Safe

According to consumer surveys, there are lots of reasons to love BNPL over other forms of payment, not least of which is the fact that it affords consumers much greater flexibility in terms of managing their finances. A PYMNTS survey of Sezzle users in April-May 2021 found that a full 55.6 percent of BNPL adopters chose the method as it allows them to spread out their payments over time. Further, nearly 40 percent said BNPL helped them to budget their monthly expenses more easily, while 25 percent said they didn’t have any other choice, as they couldn’t afford to pay for their product without BNPL.

Ease of use is always a big benefit and that was also reflected in the Sezzle survey, with exactly 55 percent of respondents citing how much simpler BNPL made the payment process. Security is at the top of mind for many buyers too, with close to 40 percent of respondents saying they trusted the BNPL method and 15 percent stating they believed it reduced the chance of fraud.

Affordability is another factor, where almost one in three BNPL buyers said they found it a compelling payment option due to the lack of fees.

Readers also like: Buy Now, Pay Later: The Financial Self-Care Revolution Report

3. It’s More Popular With Younger Shoppers

The Amazon survey shows how BNPL is taking root among millennials at a faster pace than any other generation. Some 16 percent of millennial shoppers have used BNPL at least once in the past year versus just 11 percent when looking at the general consumer population. That’s not to say others are ignoring it — they aren’t, but it’s certainly proving less of a hit with the baby boomer generation. By comparison, just 5 percent of seniors said they’d tried it.

Interestingly though, BNPL has shown it has appeal regardless of shopper’s education, income and financial status. That said, it was mildly surprising to learn that college educated, higher earners were more receptive to BNPL than their less educated, lower-income peers. Adoption of BNPL among the college educated class is 13.5 percent, compared to just 10 percent among those with no college education. And while 12.5 percent of those earning between $50,000 and $100,000 per year said they’d used BNPL, just only about 8 percent of those earning less than $50,000 per year said the same.

The most common BNPL users in terms of financial status are those who say they live from paycheck to paycheck without any issues paying their bills. According to the survey, 13.6 percent of consumers in that position have tried BNPL. Of those who live from paycheck to paycheck who do struggle to pay bills, BNPL was slightly less popular at 11.5 percent. Those who said they do not live from paycheck to paycheck are less inclined to use BNPL though, at just 9.1 percent, despite the fact that those people are more likely to be among the higher earners.

4. PayPal Is The No. 1 BNPL Provider

Another surprise emerging from our studies is that, although BNPL is a newer concept, consumers generally prefer more traditional payments companies to provide the service.

The April-May 2021 Sezzle survey found that more than a quarter (26.6 percent) of BNPL users ranked PayPal as their most preferred provider. Even more of an eye-opener is that credit card-offered BNPL services were ranked as the most preferred option by 18.3 percent of users, putting them second in terms of popularity. Store card-offered BNPL has a strong presence too, selected by 7.5 percent of users.

The findings suggest dedicated BNPL firms such as Afterpay (13.9 percent), Affirm (11 percent), Klarna (8.9 percent) and Sezzle (3.8 percent) still have some catching up to do in terms of market share.

5. SMBs Are Catching On

Last but not least, our data demonstrates that small and medium-sized businesses (SMBs) are increasingly scrambling to get in on the BNPL action. A July 2021 Afterpay survey of 313 merchants conducted by PYMNTS revealed close to a third (28.1 percent) of SMBs say they have innovated new installment payment options for their customers for in-store shopping.

The finding suggests businesses large and small are well aware that BNPL is fast becoming a necessity both online and offline, and that they’re racing to accommodate consumer preferences in their physical stores.

There are a lot of caveats to BNPL’s infiltration of SMBs however, with factors such as a firm’s geographic location, its age and the vertical it operates in all weighing in its likelihood of adopting it as a form of payment.

You might also like: SMBs And BNPL: Five Fast Facts