FinTech Tracker® Series Report

From Checkout to Growth: BNPL’s Sprint Picks Up Pace

December 2023

As 2023 draws to a close, BNPL is not just surviving, but thriving. What does this mean for the future of consumer transactions and small business finance?

PYMNTS

This year’s Black Friday and Cyber Monday shopping extravaganzas unveiled a turning point in the BNPL narrative, solidifying its role as a driver of retail conversions. The steep climb in the volume of BNPL transactions made clear the growing consumer preference for flexible payment options — both online and in-store.
BNPL’s success since the kickoff of holiday shopping this year underscores the industry’s potential to boost merchant sales and reinforces its place as a newly formed cornerstone of consumer retail strategy.
BNPL is stepping up its game, growing beyond retail to also empower small businesses and business-to-business (B2B) markets. This expansion signifies BNPL’s versatility as a payments and financial tool for all, from everyday shoppers to small business owners.


Register for Unlimited Access
Fill in the form below for free unlimited access to all our Trackers and Studies.

Thank you for registering. Please confirm your email to view all our Trackers.

    yesSubscribe to our daily newsletter, PYMNTS Today
    By completing this form, I have read and acknowledged the terms and conditions.


    The story of buy now, pay later (BNPL) in 2023 has been defined by its dynamic resilience and agile innovation — a disposition called into question as recently as last year. This year has seen BNPL move beyond its roots as a flexible payment option to establish itself as an essential feature in the consumer retail experience and, of late, a welcome ally for small businesses of all kinds. Rather than falter as predicted, the industry closes 2023 on a stronger footing, challenging traditional lending models for a place in the consumer and merchant financial toolkit. This evolution mirrors broader economic changes underway: BNPL continues to disrupt established lending norms, introducing new solutions and features for consumers and businesses looking for creative ways to pay.

    Holiday Hustle: The Growing Influence of BNPL

    This year’s Black Friday and Cyber Monday shopping extravaganzas unveiled a turning point in the BNPL narrative, solidifying its role as a driver of retail conversions. The steep climb in the volume of BNPL transactions made clear the growing consumer preference for flexible payment options — both online and in-store.

    43%

    Year-over-year increase in the amount spent
    online on Cyber Monday using BNPL

    BNPL flexes its retail muscle on Cyber Monday.

    The digital shopping sphere witnessed a record-breaking surge on Cyber Monday, with BNPL playing a pivotal role in this success. Shoppers spent a staggering $940 million online using BNPL, marking a substantial 43% increase over 2022. This leap underscores the key role BNPL occupies in powering both eCommerce and in-store conversions, especially during the high-energy holiday shopping period.

    BNPL’s growth echoes diverse shopping trends.

    The Black Friday to Cyber Monday shopping period set a new benchmark for BNPL, with a record 70 million transactions processed through Square and Afterpay alone. This growth reflects a shift in consumer habits, combining online and in-store shopping experiences. In-person shopping saw a 1.5% increase, while online carts were almost four-times larger than their physical counterparts. This data sends a clear message to retailers: Adopting BNPL is no longer optional but essential.

    BNPL is molding new holiday spending patterns.

    Recent data shows that consumers using BNPL and other pay-later options during the Black Friday shopping frenzy spent 48% more than those using other payment methods. This year-end blowout is a culminating demonstration that BNPL is redefining more than payment flexibility. Its presence is influencing consumer spending decisions, enabling users to better manage their finances while still filling their holiday shopping baskets.

    The Star Influencer: BNPL’s Impact on Merchant Sales

    BNPL’s success since the kickoff of holiday shopping this year underscores the industry’s potential to boost merchant sales and reinforces its place as a newly formed cornerstone of consumer retail strategy.

    43%

    Share of consumers who would delay, downgrade or even
    cancel their purchases in the absence of BNPL options

    BNPL was the key to higher spending on Black Friday.

    This Black Friday witnessed a jump in consumers who embraced BNPL and installment plans with wallets wide open. On average, these shoppers spent $598, which was 32% higher than the $452 spent by those not using BNPL. This dramatic difference emphasizes BNPL’s real-world potential to impact sales.

    Use of BNPL skyrockets among holiday shoppers.

    The holiday season opened with a remarkable 72% surge in BNPL usage, further upending the traditional retail payments landscape. The impact on merchant sales growth was particularly notable on Black Friday. According to a recent PYMNTS Intelligence survey, in-store usage increased from 7.9% to 9.4% year over year and online usage rose from 10.2% to 12.5%.

    To buy or not to buy? Consumers say BNPL is the answer.

    A striking 43% of consumers would delay, downgrade or even cancel their purchases in the absence of BNPL options, highlighting the payment method’s contribution to driving sales of higher-value products. In this role of “influencer” impacting consumer purchase decisions, BNPL is clearly no longer simply a tool for consumer convenience but one vital for merchants to protect their sales.

    Small Business, Big Change: BNPL’s Entry Into B2B Territory

    BNPL is stepping up its game, growing beyond retail to also empower small businesses and business-to-business (B2B) markets. This expansion signifies BNPL’s versatility as a payments and financial tool for all, from everyday shoppers to small business owners.

    22%

    Share of consumers who would be willing to ditch
    retailers if BNPL options were unavailable at checkout

    Wait, no BNPL? Consumers threaten to shop around.

    BNPL’s growth trajectory in retail has cemented its legacy as an essential tool for sustaining customer loyalty. Twenty-two percent of consumers recently reported that they would be willing to switch retailers if pay-in-four options were unavailable at checkout. This perspective is especially strong among millennials, a key demographic for retailers.

    BNPL courts small businesses.

    Amazon and Affirm announced a partnership that marks the entry of BNPL into the small business market in the United States — and sole proprietors are the focus. The big takeaway: Main Street America will gain access to flexible payments for loans ranging from $100 to $20,000. Given Amazon’s ubiquitous market presence, this partnership signals a profound recognition of BNPL’s potential to disrupt short-term financing options for small businesses.

    BNPL enters European B2B marketplaces.

    B2B marketplaces across multiple European countries often face limited payments flexibility and cash flow management options — until now. The Mangopay-Mondu partnership is a strategic masterstroke that aims to address this problem by offering small businesses in these markets the ability to integrate BNPL into B2B marketplaces.

    BNPL’s Charge Into Tomorrow’s Market

    As the curtain falls on 2023, BNPL can look back at a capstone performance. The industry started life as an alternative payment method but has leveraged its core offerings to help merchants weather tough economic headwinds. In doing so, BNPL has become central to the retail strategies of merchants across multiple continents — and it has not stopped there. The industry recently cracked the door open on the B2B market, starting with the small players that traditional lines of credit have long shunned. Now BNPL must shift its focus to 2024 and harness its momentum for continued success.

    PYMNTS Intelligence prescribes the following actionable roadmap:

    • Offer personalized experiences: Develop targeted BNPL solutions that cater to specific consumer segments. Leverage the insight that consumers tend to spend more using BNPL. For instance, offer curated plans for millennials and Gen Z that focus on their unique buying habits and preferences.
    • Amplify engagement with exclusive rewards: Enhance BNPL’s appeal by linking it to loyalty programs and exclusive offers. Reward frequent users with perks such as early access to sales, special discounts or even extended payment terms.
    • Bridge online and offline strategies: Ensure that BNPL seamlessly integrates across all sales channels. Offer consistent options online, in-app and in physical retail locations, reinforcing the convenience and accessibility of the service.
    • Launch specialized solutions for B2B marketplaces: Tailor BNPL solutions for the B2B segment’s unique industry needs. Introduce flexible terms and custom integrations for different business scales and sectors, expanding BNPL’s utility in the B2B landscape.
    • Cultivate small business growth with curated feature sets: Create BNPL features specifically designed for small business scalability. These could include flexible credit lines for inventory purchases or seasonal cash flow support, facilitating growth and stability.

    The BNPL industry has earned a moment to reflect on its strategic direction. This roadmap is designed to build on the year’s remarkable achievements to kick-start feature developments that deepen engagement with consumers and small businesses.

    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


    We are interested in your feedback on this report. If you have questions or comments, or if you would like to subscribe to this report, please email us at feedback@pymnts.com.

    Disclaimer

    The FinTech Tracker® Series may be updated periodically. While reasonable efforts are made to keep the content accurate and up to date, PYMNTS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THE CORRECTNESS, ACCURACY, COMPLETENESS, ADEQUACY, OR RELIABILITY OF OR THE USE OF OR RESULTS THAT MAY BE GENERATED FROM THE USE OF THE INFORMATION OR THAT THE CONTENT WILL SATISFY YOUR REQUIREMENTS OR EXPECTATIONS. THE CONTENT IS PROVIDED “AS IS” AND ON AN “AS AVAILABLE” BASIS. YOU EXPRESSLY AGREE THAT YOUR USE OF THE CONTENT IS AT YOUR SOLE RISK. PYMNTS SHALL HAVE NO LIABILITY FOR ANY INTERRUPTIONS IN THE CONTENT THAT IS PROVIDED AND DISCLAIMS ALL WARRANTIES WITH REGARD TO THE CONTENT, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT AND TITLE. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF CERTAIN WARRANTIES, AND, IN SUCH CASES, THE STATED EX CLUSIONS DO NOT APPLY. PYMNTS RESERVES THE RIGHT AND SHOULD NOT BE LIABLE SHOULD IT EXERCISE ITS RIGHT TO MODIFY, INTERRUPT, OR DISCONTINUE THE AVAILABILITY OF THE CONTENT OR ANY COMPONENT OF IT WITH OR WITHOUT NOTICE.
    PYMNTS SHALL NOT BE LIABLE FOR ANY DAMAGES WHATSOEVER, AND, IN PARTICULAR, SHALL NOT BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAM AGES, OR DAMAGES FOR LOST PROFITS, LOSS OF REVENUE, OR LOSS OF USE, ARISING OUT OF OR RELATED TO THE CONTENT, WHETHER SUCH DAMAGES ARISE IN CONTRACT, NEGLIGENCE, TORT, UNDER STATUTE, IN EQUITY, AT LAW, OR OTHERWISE, EVEN IF PYMNTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
    SOME JURISDICTIONS DO NOT ALLOW FOR THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND IN SUCH CASES SOME OF THE ABOVE LIMITATIONS DO NOT APPLY. THE ABOVE DISCLAIMERS AND LIMITATIONS ARE PROVIDED BY PYMNTS AND ITS PARENTS, AFFILIATED AND RELATED COMPANIES, CONTRACTORS, AND SPONSORS, AND EACH OF ITS RESPECTIVE DIRECTORS, OFFICERS, MEMBERS, EMPLOYEES, AGENTS, CONTENT COMPONENT PROVIDERS, LICENSORS, AND ADVISERS.
    Components of the content original to and the compilation produced by PYMNTS is the property of PYMNTS and cannot be reproduced without its prior written permission.
    The FinTech Tracker® Series is a registered trademark of What’s Next Media & Analytics, LLC (“PYMNTS”).