Installing Installment Payments Is Paying Off With Millennials, And More

‘Buy Now Pay Later’ Breaks Through

It’s good to be flexible. Just ask any gymnast. If you can’t find a gymnast, ask a shopper.

PYMNTS’ latest Buy Now, Pay Later Tracker®, done in collaboration with Afterpay, shows just how much Americans love flexibility – especially the kind that lets them spend almost as much on gifting in 2020 as they did before pandemics or recessions or any of the current hot mess.

What’s more, the growing love affair with buy now, pay later (BNPL) terms are becoming entwined with certain card preferences that further strengthen its value prop. Like debit.

“During the COVID-19 pandemic, millennials and Generation Zers have demonstrated an aversion to financial risk, especially for lifestyle purchases,” Nick Molnar, co-founder and co-CEO at Afterpay, told PYMNTS. “While there is an obvious acceleration in online spending, there is also a shift away from credit cards. Young shoppers across the markets we serve use their own money and avoid high-interest credit and excessive fees. In fact, nearly 90 percent of Afterpay transactions are made with debit cards.”

It explains a lot – and far more is elucidated in the latest Buy Now, Pay Later Tracker®.

Financial Wellness Is the New Fitness

Given the level of credit shyness, “installment payment plans have become especially crucial to millennials, who eschew traditional debt- and fee-based credit products but still seek flexible lending solutions,” per the Tracker.

“PYMNTS research found that these consumers are relying on BNPL options to make many of their purchases, especially as almost 80 percent of them live paycheck to paycheck. Offering BNPL solutions could be instrumental in helping merchants reach this consumer segment, especially as many of them gear up for holiday purchases.”

Afterpay’s Molnar concurs, telling PYMNTS that “young shoppers are increasingly wary of credit and loans with interest, fees and revolving debt as demonstrated by spending trends worldwide. The new way to pay with BNPL empowers shoppers to use their own money in a responsible and safe way. Financial wellness and budgeting is and will continue to be the way young people pay for things.”

These ongoing glimpses into the mind of BNPL enthusiasts are particularly important during this gifting season, as COVID continues to suppress economic activity across the entire spectrum.

A Reliable, Sizable Consumer Base

It all makes a powerful argument for merchants – online or off – to add BNPL capabilities. Recent PYMNTS research revealed that payment options are a major determinant of where people spend. One survey found that “consumers who value BNPL options tend to be the most loyal, with 48 percent of those who prefer the method stating that they would not purchase from retailers that failed to offer it.”

Compare this to the 40 percent using mobile wallets, the 37 percent using contactless cards and the 34 percent tapping QR code-enabled payments who said the same. “The study revealed that merchants willing to provide installment payment plans could thus tap into a reliable, sizable consumer base.”

As the latest Buy Now, Pay Later Tracker® states, “Businesses looking to appeal to more consumers would be wise to offer BNPL options, according to a recent survey. Forty-eight percent of those who prefer such solutions would not do business with retailers that failed to provide them. This compared with just 40 percent of those using mobile wallets, 37 percent of those using contactless cards and 34 percent of those tapping QR code-enabled payments.”