As many as 23% of American adults may need a “second chance” to gain access to the low, affordable payments that a higher credit score would provide, with 59% of these people saying they are “very” or “extremely” interested in taking steps to improve their credit.
For many, this has meant turning to buy now, pay later (BNPL) options, which 57% of second-chance consumers say is a viable method of boosting their credit scores — meaning that merchants who offer BNPL are more likely to gain their business.
“These customers lack traditional credit, but they’re consumers that deserve to be trusted,” Sezzle Chief Revenue Officer Veronica Katz told PYMNTS in an interview.
Approximately 65% of all consumers say they see BNPL options as a way to purchase something without overspending, including over 70% of second-chance consumers, according to research conducted by PYMNTS in collaboration with Sezzle. Forty-eight percent of all consumers also view BNPL companies as more trustworthy than banks or credit card issuers, as do nearly 54% of second-chance consumers.
See more: Study Confirms Love Match Between BNPL and ‘Second-Chance Consumers’
“There’s this misconception that buy now, pay later is solely around consumers who don’t have the ability to shop otherwise,” Katz said. “We see income levels all over the board, and no matter how much someone may earn, there is real value in being able to manage your money and not pay interest and spread it over a short period of time.”
According to the PYMNTS and Sezzle research, 65% of second-chance consumers earn more than $50,000 per year, and 30% earn above $100,000. The average second-chance consumer is 44 years old and has a FICO score of 662 — just 38 points shy of a typical “good” credit score.
Katz said, though, that “the next-gen shopper is not always the young millennial or the prime customer who has an established credit.” One way Sezzle tries to meet these consumers is through Sezzle Up, a product that reports payment history to credit bureaus in order to increase a person’s credit score.
“It’ss really about trying to help consumers who either need the tools or assistance to manage their money or to be able to have access to credit for the things they need without burdening them with long-term debt,” Katz said.
Spreading Awareness
Even as BNPL becomes more prevalent in the U.S., PYMNTS data shows that 72% of second-chance consumers have not used the payment option, and nearly one-third say they’re not familiar with it.
Katz said awareness is growing quickly as “friends are telling friends … and younger consumers become a bigger population group,” but more work still needs to be done to bolster familiarity. Sezzle has found that enterprise merchants are a big source of building awareness for its products, as well as social media and other marketing campaigns.
“There’s a lot of different things that we’re doing, but probably one of the big things is really getting more doors in big enterprise merchants,” Katz said.
She added that the upcoming holiday shopping season presents a big opportunity for Sezzle and other BNPL providers to close the awareness gap. U.S. retail sales in November and December are expected to grow by 7.4% compared to 2020 and by 11.1% compared to 2019, with digital sales projected to increase by 7.6% year over year and 57.3% versus 2019.
Read more: Mastercard Predicts 7.4% Retail Growth During Holiday Shopping Season
And with consumers concerned about making sure gifts come in time as supply chain challenges persist, many are starting their holiday shopping earlier than in previous years, which potentially opens the door to using BNPL as a budgeting tool.
“If you were thinking you normally save to do your holiday shopping in December, and now you’re thinking about doing it a month to two months earlier, you might need that extra little leeway to get your purchases done,” Katz said.
What it mostly comes down to, she said, is helping put up guardrails to prevent consumers from overspending.
“We’re focused on the consumer that is maybe not in the credit funnel,” Katz noted. “Maybe they hit a hard patch and they’re repairing their credit, but they do have the ability to repay. And I think our mission to financially empower the next generation is very clear.”
See also: Sezzle Files Draft Paperwork for US IPO
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