Just a few years ago, buy now, pay later (BNPL) was a plucky new payment method used mostly to purchase clothing and accessories in painless installments. It was a big hit.
Over time, BNPL started to embrace increasingly higher-priced items, and it is holding that trajectory by offering even more flexible terms.
Unlike classic BNPL, which extends repayments as far out as 60 days (and usually no longer than two months), flexible financing’s sweet spot is purchases of $500 or more that require more time to pay. Much more, by BNPL standards.
It’s all part of an evolution, Sezzle Vice President of Long-Term Solutions Product Rob Seidman told PYMNTS, and everything from BNPL experience to loyalty is in play right now.
“I think 2022 is going to be an interesting year,” Seidman said. “I would characterize it as the year of ‘more’ and ‘more interesting.’”
Flexible financing covers the “more” part pretty well.
With consumer need for payment choice powering the sector, he said the emergence of flexible financing out of the BNPL space offers “a single way to check out that’s compelling; easy to use; transparent; and regardless of your credit history or the dollar amount of your purchase, it’s still the same experience. If you get those things right, flexible financing becomes an integrated part of how any retailer, and frankly any merchant, does business.”
In the third quarter last year, Sezzle partnered with Ally Lending to offer customers long-term financing options. That decision arose from what Seidman called thoughtful discourse with merchants about adding new payment methods. Later in the year, Sezzle also partnered with Bread, owned by Alliance Data, to further expand its long-term payment.
Beyond in-app dazzle and loyalty perks, the “experience” is instant gratification — on layaway terms.
In “The New Credit Model: Why Financially Worry-Free Consumers Still Want Alternatives To Traditional Credit,” a PYMNTS and Sezzle collaboration, the research found that “BNPL’s ability to spread payments over time and its ease of use are the reasons most cited for choosing the method regardless of the consumer’s level of financial inclusion. More than half (55%) of consumers cited each of these reasons for choosing BNPL for online purchases.”
Get the study: The New Credit Model
Decisions, Decisions
Given that PYMNTS’ Provider Ranking of BNPL apps currently tracks 10 or more companies, merchants have decisions to make about what to offer consumers.
Read more: PYMNTS Buy Now, Pay Later Provider Rankings
As adding new tech to the stack takes effort and expense, Seidman said that many merchants still face fundamental questions about how to use BNPL, despite its apparent ubiquity. Everyone from retail giants to small businesses is weighing legacy investments against the cost of new integrations and making important decisions that could reshape the retail landscape.
“If they’re going to change those investments, picking the right partner” to match the merchant makes a critical difference in the outcome of BNPL integrations and the ability to offer flexible financing, Seidman said. “eCommerce platforms have done a nice job. Sezzle and all of our competitive set have done a good job of making our solutions turnkey” for eCommerce and other platforms.
But between a pernicious pandemic and rising inflation, merchants are watching the bottom line right now. Not all will see conditions as optimal new concepts.
“Our job is to facilitate a responsible, transparent and affordable set of payment options for merchants and their consumers,” Seidman said. “What we continue to believe is that when you offer a range of options that are affordable and transparent, regardless of the macro environment, it’s a necessary tool for everyday living of the shoppers that we serve. For the merchant side, similarly, they still are in business, they still have to do business. Target’s CEO came out the other day and said there is no off-season anymore. We believe that to be true.”
See also: BNPL Firm Sezzle Allies With Ally Lending to Expand Loan Options
A Year of Consolidation, Expansion
Despite recent concerns about delinquencies, 2022 is certainly lining up as a pivotal time in the evolution of BNPL and flexible financing for which consumers have a strong appetite. Seidman told PYMNTS that he’s expecting some sparks this year as some players jump in and others get bought out.
“We think [BNPL is] actually needed more than before,” he said, referring to the current economic challenges, including inflation. “What onus that puts on us is to be really good stewards of risk management for our shareholders. The development cycle changes slightly for us, which is to make sure that our risk tools are in place that do a good job of understanding and anticipating changes in consumer financial health.”
That’s going to mean new partnerships between retailers and financial institutions (FIs), he said — and FIs themselves adding flexible financing and BNPL to their own technology and service offering.
“We’ll also probably see some industry consolidation, if not interesting tie-ups, whether it be on the FinTech side, FinTech to banks, or even retail or FinTechs,” he said. “We’re seeing a regression to the norm on valuations in our space, and I think that puts in play more M&A opportunities that, at inflated prices, I’m not sure we would’ve seen in the past.”
See also: Buy Now, Pay Later Boom Shows Business Value of Giving Customers a Second Chance
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More