Why Gen Z Shops Merchants That Offer Pay Later Plans

Pay later plans have gained value since they offer consumers flexibility and better spend management. PYMNTS Intelligence reveals consumers’ preferences for these plans, particularly around buy now, pay later (BNPL) options. For example, Generation Z has kept a steady use rate for pay later plans in the past six months. This counterbalances a slight dip in the use of these plans in general as consumer spending contracted in some sectors.

Gen Z also understands better than any other generation that BNPL represents a new loan, as 73% shared this accurate view. Interestingly, they care the least of any generation about pay later plans’ impact on their credit. As data shows, pay later options particularly appeal to consumers seeking to take a more active role in managing spending.

These are just some of the findings in “Redefining Retail: Consumer Finance Trends Driving the Evolution of Pay Later Plans,” a PYMNTS Intelligence and Splitit collaboration. The report looks at consumers’ use of pay later plans and draws on results from a survey of 2,655 consumers held from Feb. 13 to March 11.

Other key findings from the report include the following.

Consumers choose merchants based on pay later plan offerings.

Pay later options now play a significant role in shaping buying decisions, as half of shoppers said they would likely switch to merchants offering pay later plans. This has become a hallmark of Gen Z, with 31% highly interested in changing to merchants that provide such payment flexibility and another 31% at least somewhat interested. The report details demographic trends that merchants cannot ignore.

Consumers have a preference for using specific plans for different purchase types and values.

Usage data for various pay later plans reveals that consumers reach for specific plans based on the type and value of their purchase. Overall, consumers are more apt to use these plans on big-ticket purchases. Fifty-two percent of Generation X and baby boomers and seniors opt for installments using their general-purpose cards for purchases of more than $1,000. This contrasts with the 37% of these consumers who choose such plans for lower-value items. PYMNTS details when consumers are likely to prefer general-purpose credit card installments, merchant or store card installments and BNPL plans.

Many consumers are often unsure whether a BNPL plan is a new loan.

One issue may be that BNPL has set itself so far apart from other pay later plans that many consumers do not understand what it is. Gen Z is the most aware that BNPL plans are loans. Even so, more than one-quarter do not know this. Forty-two percent of Gen X and 38% of baby boomers and seniors do not believe BNPL represents a new loan. The general confusion about BNPL shows the need for financial education to help consumers make sound payment decisions.

Merchants need to align their pay later offerings with their product categories and consumers’ preferences. Download the report to learn how — and why — consumers are using pay later plans.