BNPL Is Poised To Light Up The COVID Holidays With Affordability

It’s hard to say which is the best part of buy now, pay later (BNPL). Let’s go with “pay later.”

Debatably the most impactful payments innovation of recent years — and that’s saying something — BNPL is having a massive impact on retail, as evidenced by the proliferation of brands and the steady flow of venture capital to players that are defining the space.

PYMNTS’ December 2020 Buy Now, Pay Later Report, a collaboration with PayPal, examines the explosion in BNPL’s popularity, starting with a certain consumer group we all know and love.

“Buy now, pay later financing services can play an important role in motivating consumers to make purchases, particularly the key demographic of millennials,” the report states. “Our research shows that this cohort is not averse to using credit, contrary to some common assumptions. These consumers do have priorities in how they use credit, however. They want to have flexibility in their use of credit, and they want to utilize it in a budget-conscious way.”

Based on two surveys of nearly 15,000 U.S. consumers, the new Buy Now, Pay Later Report is an instructive immersion into the levers that control installment commerce today.

Bridge Millennials Crossing Over To BNPL

December’s Buy Now, Pay Later Report, the ‘Millennials and the Shifting Dynamics of Online Credit’ edition, provides illuminating new numbers to quantify BNPL’s impact.

The report points out that, counter to prevailing views, millennials are more likely to own and use credit cards than any other cohort right now. How they use credit and how they feel about it, however, is what sets millennials apart from other demos. Like their love of BNPL.

“Our research shows that not only do millennials make up an outsized share of early installment credit adopters in the United States, but also close to 40 percent of them would be very interested in using such financing options if they were more widely available within digital wallets,” per the December report.

Explaining that bridge millennials “are a subset of older millennials and younger Generation X consumers who tend to be more established in their careers and embarking on major financial responsibilities, such as having children and purchasing homes,” the study found that “younger and older millennials are the most likely generations to have credit cards: 89.2 percent of millennials have them, as do 88.8 percent of bridge millennials.” Also, they are most likely to use BNPL.

What is it about layaway that millennials love? PYMNTS found that clarity of fees and interest rates (42 percent) and the ability to monitor spending (39 percent) are the reasons most cited when utilizing installments. “This reinforces the finding that BNPL users tend to be budget-conscious and financially responsible — they want to stay within their means and not blindly put charges on their credit cards or accept unclear financing terms.”

Mobile Wallets And BNPL Merriment

As to how consumers will access BNPL options in 2021 and beyond, they see the mobile wallet as a key factor in the expansion of installment payments over the near term.

“Our research shows that 25 percent of consumers who have not used BNPL would be highly interested in using such solutions as part of digital wallets,” per the Buy Now, Pay Later Report.

“Interest in this type of BNPL solution has also grown since the onset of the pandemic in March, particularly among millennials. At that time, 32 percent of millennials indicated they would be highly interested in using BNPL services. This share rose to 38.1 percent in September, a 19 percent increase. The share jumped from 33.2 percent to 40 percent among bridge millennials. This suggests that consumers’ appetites for novel financing options grew as more and more consumers went online to do their shopping,” based on an analysis of 2020 BNPL trends.

How will all of this interest be expressed in holiday sales when all is said and done? That’s unknown, but the new report is clear: “Our research shows that millennials on the whole are interested in doing as much if not more holiday shopping this year than last and will be doing it more online, yet they are reluctant to spend beyond their means and add to credit card debt. These circumstances could create increased demand for alternative financing solutions like BNPL, which in many ways is uniquely suited for the bigger-ticket discretionary purchases.”