Buy Now Pay Later

Can Buy Now Pay Later Solutions Cut Through The Holiday Noise?

U.S. consumers are expected to spend roughly $149 billion online this holiday season — but many are still paying off credit card bills from last year’s splurge. Getting consumers to spend, without making them feel overextended, may require new methods. In the inaugural Buy Now, Pay Later (BNPL) Tracker, Nick Kaplan, president of fashion brand Fashion To Figure, explains how BNPL solutions are becoming key to giving consumers financial flexibility and merchants more sales.

Holiday spending has changed over the past decade as digital payments began to filter into the retail world. U.S. consumers are predicted to spend more than $1 trillion during the 2019 holiday season, mostly through online and Cyber Monday deals.

Keeping up during this high-volume season can be difficult for retailers when shoppers have unique payment expectations. This is especially true when attitudes toward holiday payment standbys like credit cards rapidly change between generations. The goal is not to wholly replace credit but to find methods that connect with credit- or debt-shy consumers during the holidays, noted Nick Kaplan, president of fashion brand Fashion To Figure. Such connections could include buy now pay later (BNPL) solutions.

“Credit is something that people will always need,” Kaplan explained in a recent interview with PYMNTS. “Companies need it, individuals need it [and] countries need it because life is not a straight line. There’s a high level of elasticity. So, I guess what these payment methods do is they allow these people to live their lives, they allow people the ability to have choices and determine what they can and can’t responsibly undertake. [BNPL] gives a person, let’s call it, ‘adjustable, accountable credit.’”

Fashion To Figure caters to the $21 billion plus size women’s clothing market. Its BNPL solution, supported by payments provider Afterpay, launched in mid-September, Kaplan said, just a few months shy of the holidays. Kaplan expects consumers to leverage BNPL for holiday purchases, as it will allow them to free up their cash flows and better manage spending.

Cutting through the holiday buzz 

Retail is all about conversion. Merchants want customers to be able to quickly find their brands and stay loyal, which means standing out among a sizable crowd of competing products and providers, a doubly difficult task during the promotion-filled holidays. There are other considerations in play during this time, too, such as how much consumers can realistically spend. Shoppers are collectively expected to spend more during the 2019 holidays than last year, but many are still paying down credit card bills from 2018’s purchasing sprees. BNPL solutions give flexibility to those who do not want to add to their holiday debts, Kaplan said.

“There is one period of the year when we might be a bit more promotional and opportunistic than any other, and that’s now,” Kaplan admitted. “I think that our customer looks and says, oh that black everyday mini dress that’s never on sale, this is the one time of year that I can actually get it. So I think that we’re expecting to see, based on early results, [customers taking] advantage of having non-long term debt [with BNPL], but [getting] the credit to take advantage and get what [they] need.”

Fashion to Figure has not completely let go of credit, of course. The company exists under the Retailwinds umbrella that includes brands like New York & Co. and supports payments from every major credit card, its own branded credit offering and PayPal. Adding BNPL has already benefited Fashion to Figure’s site, however.

“Where I think we’ve seen the biggest benefit so far — and it is early — has been a meaningful increase in average order size,” Kaplan said. “The average order with Afterpay versus without Afterpay is up approximately 48 percent. I will also say … we have seen a conversion improvement and we have seen already, in six weeks, a little bit more activity from those people using the product than those [who] are not.”

Whether BNPL will contribute in such a meaningful way to holiday orders remains to be seen, but Kaplan is optimistic. The financial flexibility BNPL options provide could help consumers with holiday spending or credit worries.

Being 'customer agnostic' creates payment flexibility

BNPL is most popular among younger, credit-shy groups like millennials and Gen Z consumers, but the approach is finding favor with others as well.

“What was definitely an ever-present message in the conversations with a number of — actually all of — the different providers [we spoke to], was that this product would be more appealing to that millennial [or] Gen Z person, which is [who] we as an industry, in fashion, are all catering to,” Kaplan said. “The reality is we have a very broad base of customers … [and] what we have found is that [BNPL] is actually agnostic. Everybody uses it.”

The method performs well with Fashion to Figure’s core demographic of women aged 25 to 45, he added, and its use is even picking up among customers outside that range. The customer-agnostic nature of BNPL may be key to its future popularity. Retailers must always ensure they are meeting customers’ specific payment needs, which can be difficult when no digital method seems to please everyone. Perhaps introducing payment solutions that provide all consumers with key benefits is a good first step.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.