Holiday Spending Hinges on Checkout Innovation and BNPL

This holiday season, the final critical checkout moment — be it at the register, the self-service kiosk or especially hovering above an online buy button — could make or break merchants.

It’s no secret that consumers are stretched, which means the spirit of giving will run up against the hard, cold reality of affordability. While many Americans now live paycheck to paycheck, PYMNTS studies have shown, even the highest earners are not immune.

Fresh insights from Target’s earnings call this week underscored the fact that the traditional reserves of spending — credit and savings — are being actively tapped.

“Many consumers this year have relied on borrowing or dipping into their savings to manage their weekly budgets, but for many consumers, those options are starting to run out,” Target CEO Brian Cornell said on the company’s conference call. “As a result, our guests are exhibiting increasing price sensitivity, becoming more focused on and responsive to promotions and more hesitant to purchase at full price.”

The company slashed its prior sales forecast for the all-important holiday quarter.

Headwinds and Opportunities

The headwinds are there, but so are the opportunities. The merchants and providers who offer innovation at the point of checkout, in context, with personalized financing options, will have a good chance to seal the deal.

Readiness on the part of consumers is there. PYMNTS and LendingClub’s report, “New Reality Check: The Paycheck-to-Paycheck Report: Holiday Shopping Edition, found that almost four in 10 Americans said they will finance the holidays. The data shows that financially struggling consumers anticipate relying on other payment options. While 59% of consumers who plan to engage in holiday shopping report that they will use buy now, pay later (BNPL) financing, this share rises to 71% among consumers living paycheck to paycheck with issues paying bills.

But simply having those options on hand will not be enough for merchants to get consumers to pull the trigger. According to “At the Checkout: Deal Chasers Versus Loyal Customers,” a separate study crafted by PYMNTS and Checkout.com, time is of the essence. Across more than 2,000 consumers — and across several personas including “loyal” customers and “deal chasers,” — roughly a third of all groups spent less than 30 minutes online to finalize their purchases. And more than 80% of all shoppers said that the ability to use their preferred payment methods was among the most important features at checkout.

And a satisfying checkout, which obviously includes a range of payment options, is what will keep consumers coming back, according to three-quarters of the individuals surveyed.

As for the greenfield opportunity that lies ahead for BNPL — and for promotions, extended across digital channels — BNPL has captured only a low-single-digit percentage of sales, no matter where you look (see chart). If just 26% of consumers prioritize shopping at their preferred merchants over finding the best possible deal, then it’s affordability and financing options that will win the day.

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