As humans, we crave flexibility.
We like to be able to choose between shopping in-store ourselves, paying for home delivery, or selecting curbside pickup. We shop at stores that offer a range of products, in different colors, sizes, and feature sets. Brunch buffets are perennially popular, and we gravitate towards employers that offer flexible work schedules.
This need for flexibility extends to our payment preferences: a majority of consumers expect multiple, flexible spending options at checkout, including 66% of millennials and 54% of Gen Xers. Their flexible spending option of choice? Buy now, pay later.
Buy now, pay later, or BNPL for short, is a flexible payment method that allows shoppers to split their payment for a purchase into multiple installments over a period of several weeks or months. Meanwhile, the merchant receives the full payment immediately from the BNPL provider, and fulfills the order as usual.
With the BNPL provider assuming all fraud and payment liability, it’s the best of both worlds for merchants and shoppers alike. Merchants receive full payment upfront, without the risk. Shoppers receive their order immediately, with the ability to pay over time.
Thanks to BNPL’s wide-ranging benefits, its popularity has skyrocketed in recent years, with no signs of slowing down. BNPL app installs doubled during the second half of 2020, and 10% of shoppers report using BNPL on a regular basis.
BNPL’s growing popularity isn’t a passing trend. Read on to discover five reasons why this flexible payment method can benefit your bottom line and future-proof your business.
In a trend that began with the Great Recession, the last decade has seen the rise of the credit-averse shopper. Millennials, who have now experienced two recessions, a rising cost of living, and crippling student loan debt, are particularly skeptical of credit cards. They’re more than twice as likely to not carry a credit card than their older counterparts, and 14% attribute their lack of a credit card to a limited (or no) credit history.
Millennials aren’t the only generation turning to BNPL over credit cards, however. Nearly one in four Gen Xers use BNPL to avoid using a credit card. Overall, 44% of shoppers choose BNPL specifically because it offers more flexibility than credit. And when it comes to fair business practices, 30% of BNPL users say they trust BNPL providers more than they do credit card companies.
The Covid-19 pandemic accelerated the trend toward BNPL and away from credit cards. As online shopping soared over the past year, so did the use of BNPL, with a majority of shoppers using this method to pay for purchases during the pandemic.
In fact, at 45% of global ecommerce transactions, digital wallets and BNPL became the most popular payment methods in 2020, kicking credit cards, at just 23%, into the second place spot. Over the next three years, Statista predicts BNPL’s share will only continue to grow.
BNPL caters to a distinct customer set. While it includes some shoppers who may not be able to afford a purchase in its entirety upfront, the majority of BNPL users simply enjoy the convenience of splitting up the cost of a purchase over time. Over 80% of BNPL shoppers have enough funds in their bank account to cover the full cost of their purchase at checkout, but still choose to use BNPL.
BNPL also appeals to shoppers who don’t want to — or can’t — use credit cards. One in four Americans don’t have credit cards because they can’t get approved for one. Nearly one-third of online shoppers who use flexible payment methods say they would not have made their purchase “at all” if they hadn’t been given a financing option.
And because BNPL is popular across industries, merchants can reach new customer demographics no matter what they sell. Research shows shoppers use BNPL to pay for everyday purchases like clothing, food, and cosmetics, as well as big-ticket items like electronics, furniture, and appliances.
Nearly 90% of young shoppers, including those aged 22 to 44 years old, prefer buy now, pay later over other payment methods. One might assume, then, that merchants who offer BNPL see more conversions—and this is indeed the case.
Our data at Zip Co. shows that partner merchants see a 20% lift in conversions and topline sales after implementing BNPL. The consumer preference for BNPL is so strong, it can even reduce cart abandonment. One in ten shoppers say they will abandon their cart if presented with too few payment options.
With the average cart abandonment rate hovering just under 70%, anything retailers can do to lower it is a worthy investment. BNPL answers this call in two key ways. First, BNPL provides the shopper with another payment option, giving them the flexibility they want and expect. Second, by offering the option to split the full price of a purchase into multiple installments, retailers can eliminate sticker shock and hesitation at checkout.
48% of shoppers say that BNPL enables them to spend up to 20% more than they would have using a credit card alone.
This matches the results we’ve seen among Zip Co. partner merchants. Overall, our partner merchants report a 60% increase in average order value after implementing BNPL. For footwear brand Allen Edmonds, the average BNPL transaction is $10 to $20 higher than their overall average for all ecommerce sales.
Because payments are split into multiple installments, the overall purchase seems more manageable to shoppers. They’re more amenable to add-ons and upsells, leading to higher average order values (AOV).
The flexibility of BNPL empowers shoppers to buy more, and more often. According to the latest Motley Fool data from March 2021, around one in five BNPL shoppers use the flexible payment option once a month, and 17% use it at least once a week — a 50% increase from the year prior.
With BNPL, shoppers can enjoy the flexibility of financing without a hard credit check. They also have more control over their spending. This increase in consumer confidence, along with a better experience at checkout, translates to more repeat purchases.
In a world of fickle customer loyalty, BNPL can be a boon to retailers. For fashion brand Impressions, 50% of their BNPL customers have made multiple purchases. For luxury beauty retailer Violet Grey, their BNPL customers have a 60% higher repeat purchase rate than their non-BNPL shoppers.
BNPL is popular among a growing set of consumers and retailers. Consumers enjoy more flexibility and control over their spending, and merchants reap the rewards with increased conversion, AOVs, and repeat customer rate.
Ready to get started with BNPL? Quadpay offers a hassle-free setup process with no API integration required. Shoppers love our interest-free installment plans and the flexibility to pay later anywhere Visa is accepted. Get started with our instant plug and play integration today.
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