FinTech Tracker® Series Report

‘Adjustable’ Is the New ‘Agreeable’: BNPL Flexibility for Subscription Success

January 2024

Could BNPL be the checkout charmer to rewire millennial wallets for subscription success?

PYMNTS

BNPL is quickly becoming a preferred choice for consumers, particularly for millennials. Subscription merchants that seize this opportunity to integrate secure BNPL solutions stand ready to ride this wave of change, capitalizing on BNPL’s potential to drive revenue growth and to build a larger, more sustainable subscriber base.
BNPL could recast the retail subscriber experience, replacing rigid payment models with flexible options that better reflect consumers’ current expectations for seamless payments in an increasingly digital economy.
The surge in retail BNPL usage during peak shopping periods this past year highlights its potential to boost sales and operational efficiency for subscription merchants. Beyond merely driving conversions, BNPL could act as a strategic lever for sustaining subscriber loyalty and mitigating churn, especially after introductory discounts end.


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    In 2023, buy now, pay later (BNPL) crossed a threshold, evolving from a niche novelty to a preferred payment method for a growing cross-section of consumers — especially millennials. Subscription merchants that recognize this evolving dynamic are prime candidates to tap into BNPL’s proven appeal. Pay later options open a strategic avenue for merchants to explore and deploy multiple creative payment models that could drive subscriber satisfaction and prove effective at capturing a larger market share. The power of BNPL is that it very well could become the subscription industry’s differentiating ace, turning discount flybys into long-term loyalty, hesitation into commitment and complexity into convenience.

    A New North Star for Subscription Commerce

    BNPL is quickly becoming a preferred choice for consumers, particularly millennials. Subscription merchants that seize this opportunity to integrate secure BNPL solutions stand ready to ride this wave of change, capitalizing on BNPL’s potential to drive revenue growth and to build a larger, more sustainable subscriber base.

    39%

    of millennials have utilized BNPL in the
    last year, outpacing other age groups.

    BNPL is the new payment frontier for subscription merchants.

    The once-tenuous refrain for new payment methods has erupted into a full-fledged chorus. Sixteen percent of United States consumers have already ditched traditional payment methods. The breakout star replacing them? BNPL. Now identified as the go-to solution for 5% of consumers and growing, BNPL is not holding back, and neither are users. The proof? A 28% year-over-year leap in gross merchandise volume purchased through BNPL — and that was through only a single BNPL service. For subscription merchants caught in a cycle of doubt, the choice has become clear: Implementing BNPL is a ticket to meeting consumer demands head-on.

    Millennials are fueling sales with their enthusiasm for flexible spending.

    This past Black Friday, holiday shoppers leveraging BNPL shelled out an extra $150 on average compared to those using other payment methods, demonstrating the high-octane purchasing power of delayed payments. Meanwhile, 39% of millennials have shifted gears to utilize BNPL in the last year, outpacing other age groups. This preference for flexible payment options, combined with a tendency toward higher spending habits, presents subscription merchants with an open road to profit. Harnessing the momentum of BNPL could drive revenues into the fast lane, capturing a larger share of the lucrative millennial market.

    Both security and BNPL are millennial must-haves in retail subscriptions.

    Recent PYMNTS Intelligence research reveals that young consumers are more inclined than other generations to depend on retail subscriptions for their daily shopping needs — with millennials leading the trend at 39% compared to just 17% for baby boomers and seniors. Moreover, consumers who are heavily reliant on such subscriptions are also the most demanding, with these subscribers 2.9 percentage points more likely to cancel a subscription if a BNPL option is unavailable at checkout. They are also 4.2 percentage points more likely to cancel if there is no security certification displayed for customers on the site. Subscription merchants, take note: Adopting secure BNPL solutions could offer millennials the assurance they seek while simultaneously broadcasting trustworthiness.

    BNPL’s Impact on Merchant Sales

    BNPL could recast the retail subscriber experience, replacing rigid payment models with flexible options that better reflect consumers’ current expectations for seamless payments in an increasingly digital economy.

    30%

    of retail subscribers generate 79% of total
    revenue across the retail subscription space.

    Turning passing subscribers into stayers.

    Harnessing actionable insights is becoming less of a puzzle. For 96% of businesses, customer churn has become a solvable glitch, not a dead end. How? One approach is a focused data analytics game plan that could inform key strategies for minimizing subscriber cancellations, from pricing tweaks to enhancing customer service. By bolting BNPL to a smooth onboarding process and top-notch customer support, subscription merchants could create a potent mix to boost loyalty and fuel growth.

    VIP millennial subscribers demand frictionless payments.

    Millennials dominate the VIP subscriber pack, a highly lucrative subscriber persona that tends to spend big and maintain long-term subscriptions. These subscription connoisseurs crave payment convenience and flexibility, with VIP subscribers much more likely than others to cancel due to payment problems and other inconveniences. Subscription merchants can cater to VIP tastes by making sure that BNPL is on the menu of payment choices.

    BNPL is a gateway to subscriber loyalty.

    PYMNTS Intelligence finds that “loyalists” — subscribers who generate an outsize share of revenues — tend to be millennials. These high-value subscribers appreciate flexible plans, with the availability of BNPL options being among the top 10 features driving subscription sign-ups — and unlocking the door to subscriber retention.

    Translating ‘Buy Now, Pay Later’ Into ‘Subscribe Now, Stay Longer’

    The surge in retail BNPL usage during peak shopping periods this past year highlights its potential to boost sales and operational efficiency for subscription merchants. Beyond merely driving conversions, BNPL could act as a strategic lever for sustaining subscriber loyalty and mitigating churn, especially after introductory discounts end.

    20%

    of subscribers plan to cancel their subscriptions
    after introductory discounts end.

    BNPL can boost the holiday haul for subscription merchants.

    Recent data tells a compelling story: BNPL transactions experienced a significant upswing at the onset of the 2023 holiday shopping period. Square sellers alone reported that sales through Afterpay’s BNPL solution skyrocketed by 47%. This uptick underscores BNPL’s superpower as a strategic payment tool that can improve not only sales performance but also operational efficiency during high-volume shopping events — and do so at scale.

    Transforming payment hurdles into stepping stones for subscriber loyalty.

    Loyalty is a revenue lifeline for retail subscription services: 30% of loyalists generate 79% of retail subscription income. However, retaining these subscribers is fraught with potential deal-breakers, from service hiccups to unwanted renewals — essentially any hurdle in the payment process. By ironing out transaction wrinkles and offering flexible payment alternatives, BNPL becomes both a guardrail against subscriber churn and a cornerstone for subscriber satisfaction.

    Discounts fade, but flexibility can hold subscribers’ gaze.

    At the wane of introductory discounts, 20% of subscribers report they plan to cancel their subscriptions. Subscription merchants can combat this trend. How? Turn discount hunters into committed customers by empowering BNPL to morph rigid subscription payment models into ones that flex according to subscriber needs.

    Subscribing to Success: BNPL as a Keystone to Subscription Growth

    Retail strategy is increasingly guided by consumer demand for flexible and personalized payment experiences. Moving forward, subscription commerce will be no different, and subscription merchants face the critical task of adapting their business models to stay competitive accordingly. Although the operational demands of subscription commerce make it a seemingly unlikely partner, BNPL offers an innovative solution that addresses changing consumer preferences and reflects the broader shift toward a more agile, customer-centric economy. However, the challenge lies not only in adopting BNPL but also in leveraging it to strategically enhance customer engagement, loyalty and overall business growth.

    PYMNTS Intelligence prescribes the following actionable roadmap:

    • Offer customized, flexible plans for loyalists: Develop tiered BNPL options that reward subscriber tenure and spending. For long-term loyalists, offer incremental benefits or relaxed payment terms, encouraging sustained engagement and appreciation for the value your products provide.
    • Capture millennial attention with experiential bundles: Millennials crave value-added experiences. Pair subscription offerings with optional add-on events or limited-time access to additional services that function to create unique subscriber experiences. This strategy could not only attract this lucrative demographic but also position BNPL as part of an enticing lifestyle proposition.
    • Employ predictive analytics to offer tailored payment plans: Analyze subscriber spending habits and preferences to offer predictive, personalized payment plans. For instance, if data suggests a subscriber persona tends to customize their subscription purchases at certain times of the year, your platform could proactively offer tailored BNPL plans before these periods, potentially increasing average purchase value.
    • Streamline onboarding with incentives: Address initial reluctance to subscribe by offering risk-free trials, but through a BNPL framework. For new users, present the first subscription cycle at a deferred or fractioned payment, reducing the perceived risk and friction on the path from trial to loyal subscriber.
    • Tackle subscription fatigue with ‘payment holidays’: Offer periodic BNPL “payment holidays” as a loyalty perk or seasonal promotion. During these times, subscribers enjoy discounted pricing or deferred payments, providing financial breathing space and fostering goodwill.

    Subscription merchants that creatively embrace BNPL could transform the very architecture of subscriber relationships — and pave the way for a more engaged, loyal subscriber base.

    About

    Sezzle is a payments company on a mission to financially empower the next generation. Sezzle’s payment platform increases purchasing power for millions of consumers by offering interest-free installment plans at online stores and in-store locations. When consumers apply, approval is instant, and their credit scores are not impacted unless the consumer elects to opt in to Sezzle’s credit-building feature, Sezzle Up. This increase in purchasing power for consumers leads to increased sales and basket sizes for the more than 41,000 active merchants that offer Sezzle.
    As the only B Corp in FinTech, Sezzle proves that all industries — even payments — can do their part to provide solutions and make a positive impact today and into the future. For more information visit Sezzle.com.

    Ingo

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writer: Randall Brown


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