BNPL Transparency May Be the Missing Link to Customer Loyalty

Buy now, pay later’s (BNPL’s) disruption of the traditional credit market is not a surprise, as this digital payment method allows consumers to break up large purchases into installments without interest or fees — offering both credit access to those who might otherwise be denied and convenience to those who already enjoy using credit cards. Growing competition in BNPL may be fueling another trend: Credit cards could be losing top-of-wallet preference to legacy BNPL payment schemes, which risk diluting cardholder loyalty. This is at a time when consumer loyalty to credit cards based on rewards programs is well-documented.

In this edition of the “Buy Now, Pay Later Tracker®,” PYMNTS explores the impact of BNPL offerings on consumer payment preferences, trust and loyalty.

Around the BNPL Payments Space

BNPL made up approximately 2% of all global payments toward the end of 2021, but its sales volume is on track to double, exceeding $181 billion this year. As adoption surges, with vendors such as Klarna, Affirm and Afterpay reporting year-over-year growth ranging from 46% to 104%, retailers have climbed aboard, and no wonder: A recent report noted that nearly half of consumers spend more when using BNPL than they would if using credit cards. Rising competition in the space has BNPL providers starting to offer loyalty programs as well, but loyalty in BNPL appears to be fragmented at best. Consumers are driven by opportunity — the best deal, the best shipping option, the availability of what they want. Most BNPL sales are associated with transient consumers.

BNPL’s momentum is rising, especially for purchases with larger price tags, such as travel. Canada’s largest airline, Air Canada, announced a collaboration with Visa to make BNPL installment payments available to eligible Visa cardholders. The team-up makes Air Canada one of the first airlines to participate in the Visa Installments Solution and appears to be the latest example of a growing trend, with BNPL turning up in more physical retail locations. By providing greater payment flexibility, the offering will allow more Canadians to travel, both domestically and internationally.

For more on these and other stories, visit the Tracker’s News and Trends.

Rare Carat on Building Loyalty Through BNPL and Transparent Payment Options

For many consumers, the decision to buy an expensive piece of jewelry is based on affordability as much as sentiment. A lack of transparency around what they will pay and the thought of accruing interest can be a hindrance to completing this purchase altogether. This is why offering consumers payment options that allow them to avoid interest while making payments in installments can be the win-win solution that both merchants and buyers are looking for.

In this month’s Feature Story, Apeksha Kothari, chief operating officer for Rare Carat, explains how transparent BNPL payment options help build loyalty with customers who not only return, but pay it forward through word-of-mouth.

PYMNTS Intelligence: Is Consumer Loyalty Stronger to Merchants or BNPL?

The fast rise of BNPL is shifting merchant perspectives on its impact on consumer loyalty. It is generally more expensive to attract new customers than retain current ones. Similarly, existing customers tend to spend more and buy more often. Still, consumers are driven by opportunity.

This month’s PYMNTS Intelligence explores how credit cards with rewards that also include BNPL installment features can boost customer loyalty to merchants and potentially increase card utilization.

About the Tracker

The “Buy Now Pay Later Tracker®,” done in collaboration with Splitit, examines how consumers can use buy now, pay later installment payments to drive consumer loyalty and how integrating BNPL installments into credit cards offers a unique opportunity for issuers and merchants to form stronger relationships with consumers.