How Buy Now Pay Later is changing the way we spend our money

By the end of 2021, people would make retail purchases worth at least $100 billion using BNPL options. This is significant because it was just $20 billion in 2019 and $24 billion in 2020.

BNPL is also known as installment payments and point-of-sale financing (POSF). These options have always been in practice for a long time and are not a new trend. What’s different in today’s BNPL service is its influence, role and place in the customer’s journey.

In this article

In the United States, members of Gen Z are using Buy Now Pay Later (BNPL) options more than ever before to spend their money. In fact, there is a six-fold increase from 6% in 2019 to 36% in 2021.

It’s not just Gen Z. Even usage by millennials has increased to 41%, which is more than two times since 2019. For Gen X, the usage has tripled whereas Boomers are now starting out for the first time.

By the end of 2021, people would make retail purchases worth at least $100 billion using BNPL options. This is significant because it was just $20 billion in 2019 and $24 billion in 2020.

The customer’s journey

Buy Now Pay Later is also known as installment payments and point-of-sale financing (POSF). These options have always been in practice for a long time and are not a new trend. What’s different in today’s BNPL service is its influence, role, and place on the customer’s journey.

Traditionally, BNPL, POSF and installment payments were an option at checkout after the purchase is made and the customer is ready to make the payment —  at the end of the customer journey. Whereas today, BNPL plays a role while a customer is looking for a product and retailer itself —  at the start of the journey.

Payments are now considered to be the fifth P of marketing  —  the other 4 Ps being product, place, price and promotion. Today, retailers influence the prospect of buying by offering different payment options, methods, and credit.

How is BNPL changing?

  • Some BNPL apps allow their merchant partners to advertise products. Usually, BNPL apps charge for the promotion only if a customer clicks on the advertisement.
  • When credit cards were introduced, companies claimed they help merchants make sales that wouldn’t have been possible without them. BNPL providers claim the same. However, today’s merchants are demanding accurate attribution statistics unlike the credit card days. So, BNPL providers need to work on accurate attribution statistics.
  • Amazon is partnering with Affirm (instead of acquiring) to test the direct impact of Buy Now Pay Later on sales. 

Downsides

Moreover, 31% of people who use the Buy Now Pay Later option believe that their finances are dire or struggling, while others believe they are managing and thriving. 43% of people using BNPL made late payments over the past two years. However, only a third of them said that they didn’t have money to pay the bill.

Two-thirds of them said that they were swamped with many due dates and this didn’t seem important at the moment. The credit card limits were decreased for nearly more than half of the BNPL users in 2020. However, no warning from a financial expert has hindered the growth of BNPL services, just like the growth of credit cards.

What would happen to banks?

For now, banks offer guidance and monitoring to BNPL users, even though banks are product providers (checking account, loan, etc.). Right now, the majority of BNPL purchases are paid with either a debit or credit card; thus, banks have the chance of getting an interchange fee because the money isn’t paid upfront.

If BNPL services can avoid interchange fees in other payment forms, they would definitely move to other payment options in the near future. And as BNPL providers have data of consumer’s shopping habits, merchants would be the right partners for them, rather than banks.

Meanwhile, this is why it is important to pay on time when you use Buy Now Pay Later.

This page is purely informational. Line does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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