Room To Grow For ‘Buy Now, Pay Later’


“Buy now, pay later” (BNPL) options are very popular — when people know they exist, that is.

In the April-May 2020 edition of the Buy Now, Pay Later Tracker®, done in collaboration with Afterpay, we discover that the draw of instant credit has greater potential than it has already shown and, as awareness grows on this concept, there’s plenty of headroom for growth.

Noting that poor or no credit history is a barrier to obtaining traditional credit — especially for younger people and the unbanked — BNPL doesn’t rely solely on traditional metrics to access creditworthiness, making this form of payment highly attractive to younger shoppers.

That attraction can be ratcheted up quite a bit as BNLP awareness and availability spread.

How High Is Up?

The confluence of debt fear and a desire to buy cool stuff keep nudging BNPL growth.

“Several factors have led to this affinity for BNPL solutions, one of which is a general unease about traditional credit options,” the report states. “A study of consumers ages 22 to 30 showed that 20.3 percent of younger consumers had poor credit from past payment issues, while 18.8 percent lacked the credit history to be approved for credit cards in the first place. BNPL services bypass both problems, as they do not require credit checks and will not affect credit scores as long as payments are made on time.”

“This interest could translate into increased usage if more consumers were exposed to BNPL options. Just 45 percent of debit card holders have been offered installment payment plans online and 28 percent while at retail stores, according to recent research. Credit card holders are even less familiar with BNPL services, with only 17 percent being offered such options. This represents a massive userbase that could be convinced to adopt BNPL payment plans, with 51 percent of credit card holders accepting installment plans when offered them,” said the report.

How high is up when it comes to BNPL? That’s an unanswered question across basically all retail operations and categories, not just BNPL, as the great reopening looms.

“There is a large and growing number of U.S. consumers who prefer to use installment payments in this market,” Afterpay Co-Founder and U.S. CEO Nick Molnar told PYMNTS. “When we first launched Afterpay on our U.S. partners’ sites, we immediately became 10 percent, 20 percent and sometimes as high as 50 percent of … retailers’ transaction volumes. And once our platform is offered, consumers come back to use it again and again.”

Good For People, Good For Business

The popularity of buy now, pay later options is catching on as more merchants add it to their payments mix, which will lead to a doubling of the BNPL market in places like the U.K. by 2023, according to the latest Tracker. As much a consumers love it, stores benefit rather a lot, too.

“These systems are also beneficial to businesses, with many reporting that consumers spend 55 percent more at stores when offered BNPL options,” the report states.

“Such offerings seem to drive new sales while also bolstering existing ones, according to the research, with 44 percent of BNPL users saying they would not go through with purchases if these options were unavailable.”

The report adds that, “Such products do come with risks, though, including that customers will not pay for their items as promised,” which has some firms using “… third-party BNPL solutions that handle customer nonpayment risks rather than creating their own in-house offerings.”