Growing BNPL Demand Outpaces Merchant Response

Buy now, pay later (BNPL) has gone mainstream. So much so that if businesses don’t provide this payment option, they might lose out on sales at checkout. This is especially important as inflation influences whether consumers choose to spend money.

Jacqueline White, president of i2c, emphasized the growing importance of BNPL to Karen Webster saying, “It’s never been more important for people to be able to hang onto their cash, as more consumers are looking to use BNPL to pay for the necessities of life … all the way around to fun things like travel and entertainment.”

According to PYMNTS, installment payment or split-pay options are a tactic that businesses can use to reconnect with indecisive shoppers and enhance sales. A recent PYMNTS Intelligence study revealed that 68% of those who adopt installment plans believe that businesses are highly likely to sell more expensive products or services if they present card installment plans to customers before the checkout process. This presents a chance for retailers to regain their profit margins.

Furthermore, collaborative research conducted by PYMNTS Intelligence and i2c indicates that consumers tend to spend more when using BNPL services. Basket sizes are consistently higher by several percentage points compared to when shoppers use credit cards or other payment methods.

“BNPL feels like a ‘microdose’ of credit,” White continued.

It’s a kind of credit that feels easy to handle as the repayment expectations are clear, short and transparent. According to White, consumers feel more in charge compared to other types of credit.

Read more: Buy Now, Pay Later to Surge in 2024 as Consumers Demand ‘Micro-Credit’

“Acquirers’ Navigation of an Uncertain Installment Plan Landscape,” a PYMNTS Intelligence and Splitit collaboration, explored consumers’ use of installment plans for common purchases and surveyed 50 acquirers. Only 38% of acquirer respondents allow merchants to provide installment plans for their store cards, and just 32% actively endorse BNPL schemes. Even though consumers can choose to divide credit card payments into installments after a purchase through their bank, only 8% of acquirers support splitting purchases with general-purpose card installments at the point of purchase.

This goes against consumer preferences, as revealed by the same study, which indicates that most consumers desire installment options linked to their cards and prefer merchants to provide them before making a purchase. Therefore, enabling split-payment choices, whether through credit cards, store cards, or BNPL, might be an overlooked opportunity to boost sales not only in gifts, consumer services, and nonessential retail products but also in discretionary spending.

According to another study by PYMNTS Intelligence, shoppers who indulge in discretionary spending are more likely to make payments using credit cards and BNPL schemes. In particular, among these indulgent shoppers, there is a 20% increase in credit card usage compared to those who do not engage in nonessential spending, and BNPL usage experiences a significant surge, reaching 85% higher levels.

Latest Players to Offer BNPL

Walmart. But it’s not what you think. Think “bag now, pay later” at self-checkout.

Through the new offering, Affirm’s pay-over-time choice is now accessible at self-checkout kiosks in more than 4,500 Walmart stores throughout the United States.

“Recent Affirm research revealed that more than half of Americans are looking for retailers to offer a buy now, pay later option at checkout,” Affirm Senior Vice President of Revenue Pat Suh said in a news release.

Read more: This Week: Amazon’s Prime Time Play; Walmart’s Bag Now, Pay Later Scheme

Then there’s payments platform FreedomPay, which has collaborated with Citi to facilitate the use of Citi Pay products at the point of purchase.

“This collaboration provides consumers with flexibility in selecting their preferred lending solutions at the point of sale, further enhancing their shopping experience,” the companies said at the time of the announcement.

This collaboration enables merchants to provide a broader range of payment options, including BNPL and digital-only credit cards.

Read more: Citi Teams With FreedomPay to Offer Payments Choice at Checkout

And it wouldn’t be the same if Google didn’t step into the BNPL arena. In December, PYMNTS reported that Google Pay introduced a pilot program in collaboration with Affirm and Zip. This initiative aims to showcase the various BNPL options provided by these platforms at selected apparel/accessories, theater, and travel merchants in the United States that accept Google Pay for online transactions.

Read more: Google Pay Pilots BNPL as Consumers Clamor for Payment Choice at Checkout