Buy Now, Pay Later: The Future of BNPL

Posted on May 23, 2023 in Blog

The “buy now, pay later” market topped $170 billion in 2022 and saw more than 360 million unique users worldwide. BNPL options have grown thanks to the accelerated shift toward online shopping driven by the pandemic, offering ecommerce brands another payment option to meet changing demands from their customers.

As the perpetual battle for clicks and market share marches on, payment solutions have become one of the key differentiators between brands. Read on to learn more about a huge new player that just tagged into the game.

But First: Buy Now, Pay Later Statistics!

The BNPL market has exploded in the past three years, most notably in the US. Home to only 4.25% of the world’s population, roughly 22% of all consumers who choose to take advantage of BNPL financing are American. Driven by changing consumer habits during the pandemic, the number of BNPL users in the US increased by an astronomical 56% from 2021 to 2022!

Worldwide, industry experts predict there will be more than 900 million BNPL users in 2027; a 157% increase from 2022. The market has already grown from $87.2 billion in 2020 to $179 billion in 2022.

What does it all mean? Well, it’s proof positive that consumers expect BNPL to be an option online – everywhere. Brands need to meet customer expectations by opting into these platforms. Luckily, it usually only takes a few clicks!

Who Uses Buy Now, Pay Later? The Youths!

With all the “billion” talk, the most important number to remember is 66%. Two-thirds of young adults (Millennials and Gen Z) don’t own a traditional credit card – and don’t want one. That audience spends approximately $600 billion annually, making 60% of their purchases online. BNPL offers simple, accessible consumer credit to some of the most online-savvy shoppers on the planet!

Why Buy Now, Pay Later Will Reshape Online Shopping

By the numbers, the rapid uptick in customers shows just how much consumers value flexibility and simplicity in their ecommerce experience.

BNPL Provides Flexibility for Consumers

Consumers love having options – it’s why there are more than 100 flavors of Doritos. It’s also why nearly every online retailer offers a mix of payment options. Most of those options fall into one of these categories:

Traditional credit card – Chase, American Express and other retail credit cards
Digital wallets – Google Pay, Apple Pay, PayPal
Buy Now, Pay Later – Klarna, Affirm

The lines have blurred for some of these options – but we’ll get to that in a second. Digital wallets are secured payment options that store credit card information for safe transaction lines, mitigating risks like identity theft. However, at the end of the day, you’re still using a credit or debit card. Thirty-six percent of consumers say having multiple payment options would encourage them to shop with a brand, and BNPL is the only true differentiator from traditional credit cards.

Simplicity Matters

While certain terms apply (just read the fine print), BNPL is simple: consumers know that they will need to make a predetermined number of payments at a predetermined amount on a predetermined schedule. Once they’ve made their payments, they’re done.

Credit cards, on the other hand, are long-term commitments that may actively punish users for not taking on credit regularly – or for taking on too much. Lenders can cancel your card or decline applications for a new card if you aren’t a valuable credit customer.

Things get a bit more complicated if consumers miss payments, however. BNPL companies charge overdraft or late payment fees, which can be especially tough on lower-income borrowers. Among BNPL users with incomes between $25,000 and $45,000, more than 20% paid at least one overdraft fee.

The Future of BNPL

Remember those nice, neat categories for online payments? It’s not quite that simple. PayPal acts as both a digital wallet and a BNPL provider, currently holding 30.76% market share. PayPal’s buy now, pay later option makes it the largest digital wallet that offers BNPL – for now.

Apple’s Buy Now, Pay Later Bet

Apple wants to be your bank, and BNPL is just the next step. In 2023, Apple added two important financial features to Apple Pay, the default digital wallet on every device it makes.

First, it announced a savings account offering 4.15% backed by Goldman Sachs.

While that news stole headlines, the second tidbit turned retailers’ heads: Apple now offers a BNPL option within Apple Pay. The process is handled entirely within Apple Pay, which means retailers don’t have to “opt-in”; using BNPL will be a choice for every Apple Pay user on every qualifying transaction.

How BNPL Changes Consumer Habits

There’s growing evidence that these payment options can increase average order value, improve cart abandonment rates and even lower return rates among online shoppers. As marketers, we’ve seen the impact firsthand; it’s one of our ecommerce team’s consistent recommendations for new clients. For retailers, offering BNPL helps meet the needs of a growing number of online consumers – but shoppers should know their limits.

Ecommerce Is Kind of Our Thing

We love digging into the numbers. From evaluating payment options to improving conversion rates, our dedicated teams know where to look to make small tweaks that generate big returns. As a fully integrated digital marketing agency, Oneupweb leverage over two decades of experience to solve your ecommerce challenges. Tap into paid media expertise, creative graphic design and metric-centric SEO. Get in touch or call 231-922-9977 today to get started!