Millennials and Gen Yers are notoriously distrustful of credit. This helps explain why only about half of U.S. millennials have a credit card – which is to say a single credit card – and why one-third of all Americans today have never even applied for one. These shoppers prefer debit for its visibility into one’s own liquidity. But they also want what they want, when they want it.
And since hating credit isn’t reason enough to deny yourself those amazing sneakers, “buy now, pay later” (BNPL) came along just in time. The point-of-sale “instant credit” solution works on straightforward installments without complex fees or interest to calculate. It used to be called “layaway.” Now the concept is having a digital renaissance, which is extensively detailed in the January 2020 Buy Now, Pay Later Tracker®, a collaboration of PYMNTS and Afterpay.
Sneakers, Makeup and Money
BNPL is a thoroughly mobile experience that completes the retail trifecta: less expensive, easy to use and totally portable. That last part is important, as nearly 80 percent of users of the BNPL service Afterpay used a mobile phone for their transaction during the 2019 shopping season.
That was up 12 percent over the previous year, as more people fall in love with buying now and paying later. Afterpay reported $160 million in BNPL sales during Black Friday/Cyber Monday 2019, with five U.S. cities (LA, Chicago, Brooklyn, Houston, Philadelphia) seeing the greatest action.
And what did those shoppers buy now to pay for later? Tricked-out sneakers, high-end running shoes and cosmetics led the way. Top retailers using BNPL include DSW, Urban Outfitters and Ulta Beauty, and popular brands included ColourPop and Ray-Ban, among others.
The concept has legs. eCommerce lifestyle marketplace and brand aggregator Verishop debuted with BNPL on the payments menu in 2019, and management thinks it’s the ideal service not just for selling, but also for customer experience and satisfaction.
“It was a philosophy right from the beginning that we care about our customers and wanted them to have the most convenience,” Co-founder Cate Khan told PYMNTS. “We wanted them to have the payment convenience as well.”
With all the upheaval and change in the payments space, some worry that things like BNPL, daily payday withdrawals and instant credit are simply unwanted consumer debt by another name. Legislators in the U.K. and the U.S. are asking questions about these new debt products, but the overall sense is one of consumer choice and financial flexibility – both of which are clearly in demand.
A major proving ground for the true power of BNPL is mobile eCommerce, where global shopping cart abandonment hovers (depressingly) at around 86 percent. Retailers, eTailers and brand marketers have all pinned their hopes on BNPL to achieve higher conversions with the click-to-pay convenience and overall seamlessness of the mobile shopping experience.