Alternative Finances

Afterpay CEO: How Alt Payments Are Altering Black Friday Spend

Shoppers looking for something a little unusual this holiday season when they head out on Black Friday will have no shortage of interesting options. Christmas tree not smart enough? Amazon has an Alexa-enabled solution for that. Need an advent calendar, but not into eating chocolate of questionable quality? Tiffany & Co. has your back with a much sparklier option, though you’d best come with $112,000 on hand, as that is the cost of entry.

And if that sounds a bit rich for your blood, the coming tidal wave of Baby Yoda merch heading toward our retail shores will likely be a crowd pleaser.

But whatever consumers buy when Thanksgiving dinner officially draws to a close and the registers (and websites and apps) start ringing, the consensus at this point is that they will be buying quite a lot. According to the NRF 2019 predictions, Black Friday and Cyber Monday will collective bring in nearly $400 billion in spending over the course of the weekend, with 69 percent of American consumers reporting they plan to shop during the five-day stretch between Thanksgiving and Cyber Monday. Among the most avid consumers — those ages 18 to 24 — that number goes up to 88 percent, and among those ages 25 to 34, 84 percent plan to head out.

Or … stay in.

The most remarkable thing about watching the changing shape and experience of Black Friday over the last few years, Afterpay Co-founder and U.S. CEO Nick Molnar told Karen Webster in a recent conversation, is how much the holiday has changed in such a short time. The demographics of who shops on Black Friday, where they shop, what motivates them to buy and how they pay are all very different than they were even a few years ago.

What’s happening may on the surface look similar to previous years, he said, but under the hood it is increasingly evolving into a very different animal.

“People really do buy very different things and merchants are approaching the holiday in a more tactical way than ever before because consumers are — especially millennials,” Molnar said.

Changing Faces

As recently as a few years ago, Molnar told Webster, Black Friday was an American thing — because it was so closely tied to the Thanksgiving holiday. But as of 2019, Black Friday has officially gone global — maybe not quite as global as Singles Day as of yet, but in Molnar’s home country of Australia it will be one of the biggest shopping days of the year, if not the biggest. In the U.K., where Afterpay has expanded in recent years, Black Friday will get consumers both out to the high street and avidly shopping on mobile.

But as interesting as that global expansion is, Molnar told Webster, the more exciting transition to watch is the one onto mobile. Afterpay’s installment financing product, he noted, draws mostly from a millennial customer base — a fact that holds true through the holiday shopping season.

“It is really interesting to see all the ways mobile is pushing through — because millennials are a bigger and bigger part of the spending because of rising disposable income,” he said. “Within a few years 75 percent of the workforce will be millennials. Part of it is convenience and part of it is this massive influence-driven social media channel that is driving so much commerce.”

And the change in who is shopping is changing how the shopping is being done. The credit card is still the reigning champion of capturing Black Friday through Cyber Monday spend. The PYMNTS annual survey on the topic from last year confirmed that, as it did the prior year and the year before that. That, Webster noted, makes sense, insofar as the pressure to spend during the season of giving is dialed up — those Tiffany Advent calendars aren’t going to pay for themselves, after all — and there’s something to be said for being able to purchase now and pay it off in full in the new year.

An undeniable reality right now as of 2019, Molnar told Webster, but a situation that is heading toward change. Millennials and Gen Z consumers, he noted, don’t favor credit cards — two-thirds report not having one at all and even among those who do, debit cards remain the preferred method of payment. That isn’t to say consumers won’t want or need an extension of some extra funds during the holiday season, but they don’t favor the old-school revolving credit models.

Which means, he said, Black Friday and the holiday season in general can be the most wonderful time of the year for Afterpay in specific and alternative financial services providers in general, because they are offering the opportunity to make the payments in the new year — but often with better, fairer and more transparent terms than they are getting from traditional credit cards.

“People want to buy great gifts for family but don’t always have the budget to pay for that all in full upfront,” he said. “But if they know the funds are coming and you give them the flexibility to buy what they want, you are providing them with a better experience that has nothing to do with offering a discount, and everything to do with taking anxiety out of the season.”

The Season for Strategy 

The holiday shopping season is very intense, very compressed and for all parties very strategic. Customers are primed to look for the best price, coming around to look for the best payment experience and are gradually aligning all of their behaviors in retail around the phones in their pockets.

That, Molnar said, puts the pressure on merchants to don their strategic thinking caps to find ways to optimize that experience. Part of that, he said, is doing the greatest hits — creating scarcity and making sure consumers are refreshing the page or lining up outside stores at 5 a.m. to snag the unbelievable offers.

But increasingly, although this is less flashy, strategic placement means that when it comes time to check out, the customer is getting to make the full range of choices about how they want to pay beyond picking which plastic card they want to tap, dip or swipe. Because Black Friday is a changing, Molnar said — mostly because the customers showing up to shop have preferences that are evolving rapidly.

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