BNPL Makes Inroads With Luxury Brands as High Earners Pay Over Time

The conventional wisdom may be that buy now, pay later (BNPL) options are best suited for lower- to middle-income consumers, for smaller ticket items, and being able to afford necessities.

But a spate of recent announcements underscores the widespread appeal of paying over time — where stretching out transactions over weeks or months helps improve consumers’ cash flow — even among high-income households.

PYMNTS Intelligence noted in the special report “New Data: Defining the New Buy Now, Pay Later Consumer,” that for roughly two-thirds of users, cash flow management is one of the key benefits of BNPL. Roughly a third of users say the BNPL option helps them afford larger purchases.

High Earners and High-End Goods

We segmented the data in several ways — including those who used BNPL by necessity and by choice. A third of higher-income consumers, those earning more than $100,000 annually, said they’d used BNPL. With a bit more bifurcation, only 5.7% of consumers in this income bracket embraced BNPL out of necessity; about 25% said BNPL was a choice they prized among the broader range of payment options available to them.

Clothing and accessories were the product categories spurring the use of BNPL among all users — at about 33% of consumers who paid over time. Only about 6% of individuals embraced installments for luxury goods — which indicates significant room for growth.

Recent Announcements

In December, Klarna announced that it entered into partnerships with luxury retailers Neiman Marcus and Bergdorf Goodman. Per the announcement, customers of those retailers will be able to split payments into four interest-free payments with the Pay in Four option; the company’s Financing choice offers flexible payment plans; and Pay in Full at the point of checkout.

“This expansion will enhance Klarna’s stronghold in the luxury sector joining global iconic luxury stores such as Liberty and Harrods in London,” Klarna said in the release.

Elsewhere, Affirm notes on its own site that it has relationships in place with Nieman Marcus and Bergdorf Goodman, in addition to Jimmy Choo and Gucci.

Making BNPL an option at checkout may prove to be a smart move for luxury retailers. As reported here in November, luxury brands have shed roughly 50 million customers over two years as shoppers seek lower prices. BNPL, we’d contend, is a way to make luxury goods (marked by rising prices) more palatable.

After all, inflation still remains a pressure point for consumers. Earlier in December, we reported that though consumer spending remained a key driver of U.S. GDP growth in the third quarter, savings rates still remain relatively muted, which means that there’s a smaller cash cushion to augment savings; disposable income growth is not keeping pace with spending growth.

Even the highest earners we’ve surveyed have said that they face paycheck-to-paycheck realities. Roughly half of households earning more than $100,000 and about a third of those making more than $200,000 annually live within that paycheck to paycheck designation.

“For those making more than $200,000 each year, our data shows that recreation, personal care and everyday transactions account for about 28% of their budgets. We also found that high-income consumers are more likely to say that education costs and expenditures for nonessential assets significantly affect their financial situation. Put another way, high-income consumers spend more on discretionary items, which makes saving money more difficult,” per PYMNTS Intelligence findings.

All of which goes to show why BNPL is finding favor with consumers with even the loftiest of paychecks.