CareCredit - Women's Health April 2024

BNPL Field Gets Crowded as the Payment Method’s Popularity Among Travelers Grows

BNPL Field Gets Crowded as Popularity With Travelers Grows

One constant through the past few months, even in the paycheck-to-paycheck economy, has been the urge to travel, to get away from it all, to cross borders and to have new experiences.

But there’s a marked evolution in how we finance those trips — by land, sea or air — and why we need new ways to do so. Buy now, pay later (BNPL) is rapidly emerging as a payment method of choice across all travel modalities, and the field of providers and use cases is burgeoning.

B2B car rental solutions company CarTrawler and BNPL provider Klarna, for example, partnered Wednesday (Dec. 13) to use Klarna’s BNPL offering to pay for car rentals when booking on more than 70 airlines and over 250 travel websites.

In evidence that FinTechs are moving more firmly in the space, neobank Upgrade said over the summer it was paying $100 million in cash and stock to buy Uplift, a provider of BNPL payment and credit options focused on travel.

Booking.com teamed with Affirm in September to make Affirm available at checkout across several Booking Holdings travel brands, expanding on existing partnerships with Kayak, Agoda and Priceline. In terms of the mechanics, Booking.com customers selecting Affirm at checkout will have the option to choose a personalized payment plan payable in monthly or bi-weekly installments. The deal comes in the wake of Affirm’s partnership with Cathay Pacific for U.S. consumers to pay over time.

The Lure of Paying Over Time

Affirm’s own most recent earnings results underscore the wide use of BNPL for travel. In the latest fiscal first quarter, the company noted that this segment was up 56% as measured in gross merchandise volume.

PYMNTS Intelligence research showed that while credit cards still hold dominance in financing holiday travel — 66% of consumers used cards — the inroads made by BNPL have been significant, as 19% of respondents have opted for that payment option.

Only 4.5% of baby boomers and seniors have used the method, but more than a quarter of younger generations — who have more spending power over time — have done so, including millennials and Generation Z consumers. The 19% to 20% threshold is evident with consumers earning between $50,000 to $100,000 and more, which indicates that they have the means to book relatively more expensive vacations and thus fill the airline, vacation property and rental car firms’ coffers with more money.

Awaiting the Banks and the Traditional Players?

As the FinTechs and platforms band together, traditional banks have been taking steps to enter the space (although they’re relatively muted steps thus far). Some banks, including Chase and Citi, offer the option on card-based payments tied to select purchases over a certain dollar threshold.

There’s a willingness to use what might be termed the traditional providers for paying over time. “Banking on Buy Now, Pay Later: Installment Payments and FIs’ Untapped Opportunity,” a PYMNTS Intelligence and Amount collaboration, found that 70% of consumers want access to BNPL plans offered by banks rather than FinTechs. Thirty-six percent of respondents who were not currently BNPL users said they would opt for one offered by a bank over a FinTech. The willingness to switch is there, too, as 79% of Afterpay’s users and 84% of PayPal Pay in 4 users said they would be interested in a BNPL product offered by a traditional bank.