As Buy Now, Pay Later Usage Rises, It Bids to Become an ‘Option’ Rather Than Just a ‘Sweetener’

Consumer usage of buy now, pay later has increased significantly over the last couple of years. Research from Auriemma Consulting Group Inc. reveals the number of debit card holders offered a BNPL option in-store or online increased more than 10 percentage points between the first quarter of 2019 and the first quarter of 2021.

Helping drive the uptick in adoption of BNPL among debit card holders is that, even though they tend to be credit-averse, debit card users still want to take advantage of a 0% financing offer, Jaclyn Holmes, director of research for Auriemma Group says by email. Another reason debit card holders are embracing BNPL is that they see it as a way to build their credit.

Among credit card holders, 58% they had been offered an installment option at the online point of sale. Among credit card holders offered a BNPL option, 49% say they accepted the offer at least once. Within that subset, two-thirds accepted the offer more than once, says Holmes.

Overall, consumer acceptance rates for BNPL offers have increased significantly the last couple of years, with 56% of consumers being offered BNPL in-store and 51% of online shoppers being offered the payment option. 

“The top reasons for enrolling in a BNPL were simply wanting to try it out (cited by 32% of users), followed by wanting to take advantage of a low or no APR offer (cited by 31%), and feeling that the offer was too good to pass up (30%). The attractive intro offers are leaving consumers feeling there’s little downside to using them,” Holmes says. “As for the growth over merchant-provided plans, those tended to be utilized when financing a larger-ticket item, whereas BNPL are allowing increasingly smaller plan options, which can appeal to a larger audience.”

The Covid-19 pandemic has also played a role in the growth of BNPL. During the fourth quarter of 2019, 50% of those offered a BNPL option took it. That figure peaked at 61% during the fourth quarter of 2020. Since then, take rates for BNPL receded to 51% during the first quarter of 2021 among those offered the payment option, Holmes says.  

“It has become common for shoppers to see a Buy Now, Pay Later option at checkout,” Holmes says in a prepared statement. “Online, these buttons become subtle reminders for consumers, and reinforce [BNPL] as a viable payment option, especially when offered at checkout for a brand they trust.”

Another factor boosting BNPL take rates has been the entry of financial-technology providers. Fintechs such as Affirm Inc., PayPal Holdings Inc., Klarna AB, QuadPay Inc., Afterpay Ltd., and Sezzle have helped to significantly raise consumer awareness of BNPL.

“There’s been growing familiarity with the various BNPL providers (Affirm, Afterpay, Klarna, Skrill, QuadPay, etc.), which has piqued consumers’ interest,” Holmes says by email. 

Afterpay, for example, made a bid to deepen its penetration of the BNPL market Thursday by partnering with Unibail-Rodamco-Westfield, owner of Westfield shopping centers in the United States. Both companies will jointly invest in new customer experiences, retail innovation, events, marketing, and on-premise advertising at Westfield shopping centers. The two companies plan to expand their partnership globally. 

Several merchants with a Westfield location in the U.S. have recently begun to accept Afterpay, including Lush Cosmetics, Aldo, The Children’s Place, and The Container Store. 

While fintechs offering BNPL are closing the gap on merchants, which have been the most common providers of installment plans, merchants will continue to play an integral role in  adoption. More than half of debit card holders agree that being partnered with well-known or trusted retailers is paramount when it comes to feeling comfortable and secure in using BNPL, according to Auriemma Consulting.

“While merchant trust is playing an influential role in Buy Now, Pay Later adoption, these offerings are also impacting the merchant’s ticket size and shoppers’ likelihood to purchase with a merchant again,” Holmes says in a prepared statement. “This shows that a positive Buy Now, Pay Later experience can create a halo effect for the brands offering them. And with Buy Now, Pay Later becoming increasingly common and recognizable, consumers may come to expect it as a payment option rather than a sweetener.”