Younger consumers and buy now, pay later (BNPL) platforms became inseparable during the past year as the installment payment method grew during the pandemic. The assumption has been that “next-gen shoppers” will dominate the future of BNPL. They certainly have defined its recent past. PYMNTS research has found millennial and Generation Z shoppers use BNPL at higher rates than older generations, with 15 percent of millennials and 5.7 percent of Gen Z consumers using BNPL in-store compared to only 3 percent of older generations.
But BNPL provider Sezzle thinks a little bit differently when it talks about the “next generation.” In a recent conversation with PYMNTS, Sezzle Chief Revenue Officer Veronica Katz explained the new meaning of “next-gen.” Over the last year, the force of digitization has led to an emergence of behavioral preferences across generations — meaning that using BNPL to manage spend is becoming a behaviorally driven trend, more so than a demographic driven one. Every generation has an equal opportunity to learn and gain from these payment solutions.
“The promise of a next-gen shopper is that it’s not just millennials,” she said, noting that the last year of digital shift has seen consumers of all ages widening their purview in terms of the growing digital tools they are becoming comfortable using, BNPL included. As of today, the majority of Sezzle’s customers are millennials, she said, but Baby Boomers and Gen X comprise an ever-growing share that is now a quarter of the platform.
“It’s really about how do you use BNPL tools to manage your money and budget, and how do you use it to get more of what you want now?” Katz said. “The next generation shopper is a smarter shopper in terms of their ability to budget and plan. If we’re building this into the consumer DNA and helping them get smarter in how they’re thinking about budgeting and planning, and not spending beyond their limits or getting themselves in debt, it’s a great DNA to help financially empower every generation of consumers.”
And they are tools consumers are increasingly looking for, particularly in the wake of the pandemic that has seen savings in the U.S surge to $2.85 trillion in 2020, more than double the previous savings peak in 2018. Consumers across the board are looking for the kinds of transparency and control that interest-free BNPL models offer them. While the assumption can be that this is a payment mode for those who can’t afford to buy otherwise — and that is a use case that exists — the more common use coming into shape is a consumer who can pay now but who prefers the flexibility a four-part installment program offers them in terms of managing their cash flow.
Katz said Sezzle’s research found the top financial priorities in 2021 for Generation X and baby boomers are paying off debt and avoiding paying interest or late fees.
“There’s this perception that using buy now, pay later is only really for folks who can’t afford something. And certainly, that is a use case, but there’s also an element about being smart in terms of your budget and your planning,” she said.
Consumers are quick learners by nature and are increasingly leaning into relationships with brands they’ve come to trust because of their loyalty-generating BNPL offers. The goal of the Sezzle product, Katz noted, isn’t only to enable and empower consumer spending, it’s to help create better consumers. Financially empowering the next generation isn’t just marketing for Sezzle; she said, it’s the actual mission as demonstrated by the fact that it was just the first payment company in the world to gain B corporation status.
“Because we are a mission-focused B Corp., every product we develop is really around how we can provide a graduated path to credit, really help consumers get on the right path. Providing those tools and helping individuals build credit in a smart way is important to us,” Katz noted.
These goals are why the firm continues to build products on its platform designed around educating and assisting consumers via offering access to a credit product to consumers who are often left behind. It’s why, she said, that BNPL isn’t necessarily a competitive product to traditional credit. Katz sees it as a potential complement to it as firms like Sezzle increasingly focus on giving consumers access to the kind of tools and options that will help them navigate the mainstream credit system.
BNPL players like Sezzle are providing an alternative to predatory lenders that are taking advantage of financially excluded customers by offering access to funds without opaque charges, hidden fees or usurious interest rates.
“It’s about encouraging people to buy things in four installments and not get in debt for months or years to come,” Katz said. “We don’t allow people to take more than they can afford. We want to continue to promote this, and merchants can help us communicate this message on their site and in their customer materials.”
Ultimately Sezzle believes it can do well in business by doing right by consumers.
“When you get down to it, trust and building trust is everything in business,” Katz said. “And in 2020, with everything everyone’s been through, I think we’re all going to be rallying around those companies and brands we trust — I believe that will only become increasingly more important. For merchants who choose to offer a buy now, pay later option with a focus on social good, this shift is really resonating. I think it also means a lot to consumers.”
And the numbers back up that resonance with consumers. In January underlying merchants sales for Sezzle jumped to $117.8 million, a new record for the company and 65 percent above its average monthly pace in 2020.