Expect the explosive growth of the buy now, pay later (BNPL) payments sector to continue. Usage of BNPL services in the U.S. grew 215% over the first two months of 2021 compared to the same period last year. Consumers worldwide have embraced BNPL platforms like Afterpay for the flexibility to get what they want immediately and pay over time, without the risks of credit cards, like high interest rates, hidden fees, and revolving debt. As more consumers embrace BNPL, keep an eye on the following predictions.
1. BNPL will expand to new retail sectors
Global usage of BNPL is an indicator of what’s to come in the U.S. The flexibility and transparency of BNPL has made it not only a convenient solution for large purchases, as the ability to pay in four equal installments helps shoppers get items they may not otherwise be able to afford up front (or may not want to accrue interest on via credit cards), but for everyday purchases as part of a smart budgeting strategy. Early adopter markets like Australia, where Afterpay was founded, show that consumers are increasingly using BNPL for daily purchases, from pharmacy to dental visits. U.S. merchants in these sectors have a unique opportunity to be early movers, as American shoppers currently focus their BNPL use on the apparel, beauty, and department store categories.
2. Financial wellness will be the focus of BNPL innovation
At its core, BNPL is a solution for fair and responsible spending. By eliminating revolving debt from the equation and focusing on transparent, flexible terms, Afterpay seeks to serve a credit card-averse generation (currently 1 in 5 Americans have frozen their credit). In the U.S., BNPL growth is being driven by Millennial and Gen Z shoppers who are seeking the benefits of increased purchasing power without the risks that traditional lending methods carry. In fact, AdWeek reports that 40% of Millennials and 57% of Gen Zers are already using BNPL services, and nearly 90% of shoppers ages 22 to 44 say they’re interested in monthly installment plans. The BNPL providers that put financial wellness at the center of their innovation and growth efforts will gain the loyalty and trust of a new generation of consumers.
3. Customer acquisition and loyalty will be the long-term benefits of BNPL to retailers
Think of BNPL as a valuable way for retailers to earn “cultural currency” with the next generation of shoppers. As younger consumers expect deeper connections with their favorite brands--from unique perks to cross-platform experiences--bespoke marketing campaigns that integrate BNPL platforms will be key. Afterpay’s The Dropshop, an AR-driven shopping experience for exclusive product “drops,” is just one example of how BNPL is bringing renewed innovation and excitement to the customer-brand relationship. Not only do initiatives like these bring new customers to retail partners, but help merchants retain valuable consumers. In the U.S., Afterpay is increasingly driving customer retention, with the most loyal shoppers using Afterpay 48 times per year.
4. BNPL platforms will become discovery tools
BNPL is increasingly becoming part of merchants’ omnichannel arsenal. Afterpay’s services are available to merchants and shoppers both online and in-stores.
It’s also a powerful discovery tool, as many BNPL users find new brands to buy from via merchant directories like Afterpay’s. And beyond a BNPL platform’s owned channels, these partners can leverage their customer data to help advance customer acquisition strategies for retailers on paid channels.
Beyond offering access to a growing community of loyal consumers, BNPL platforms like Afterpay bring tangible benefits to merchants, including higher AOV, larger average cart sizes, increased rates of return shopping, and more. A report from Adobe found that transactions made with BNPL are 18% larger than orders using other payment options, as shoppers are empowered to responsibly flex their spending power.
With BNPL driving customers to merchants and an evolving expectation from consumers that their favorite brands offer it, it’s a smart time to explore whether buy now, pay later is right for your business.