Bizrate Insights· Author
Buy now, pay later (BNPL) is an online-based payment solution that allows consumers to purchase products using short-term installment plans. While dedicated BNPL solutions are nothing new, their usage has skyrocketed among American consumers since the onset of the coronavirus pandemic.
BNPL use in the U.S. experienced 215% year-over-year growth in the first two months of 2021, and consumers who used BNPL reported placing orders that were 18% larger compared to the same period last year.
The benefits of BNPL are clear to consumers — little to no interest, no credit checks or hard inquiries, and the ability to pay for items over time. And with 1 in 4 internet users in the U.S. projected to use BNPL services by 2025, now is the time to consider whether the feature is a good fit for your ecommerce strategy.
Read on for a brief overview of BNPL and better understand how consumers are using this rapidly growing payment solution.
How Buy Now, Pay Later Use Compares to Other Payment Methods
Unlike traditional installment loans, BNPL payment solutions offer a streamlined, online-focused approach to paying for products over time. Once they’ve selected their items, shoppers can apply for BNPL financing at checkout and be approved within minutes. While payment plans can vary based on the retailer and the BNPL provider, the total cost of the purchase is usually spread out across four equal installments that must be paid every two weeks.
BNPL payment solutions eliminate common pain points associated with credit cards, including hard credit checks and high interest rates. For younger consumers with limited budgets and credit history, this makes BNPL an especially compelling option.
Generation Z and millennial shoppers are the two age demographics most likely to consider using BNPL, according to a May 2021 survey of over 6,000 online shoppers conducted by Bizrate Insights. When given a choice, 30% of consumers ages 18 to 39 favored using BNPL at checkout compared to 27% who said they would choose a traditional credit card. Comparatively, 40% of consumers ages 18 to 39 preferred to simply make an upfront purchase, the most popular choice among consumers in this demographic.
Why Consumers Use Buy Now, Pay Later
Short-term, low-interest installment loans like BNPL existed well before 2020. However, the coronavirus pandemic has led more consumers to use BNPL regularly.
Nearly two-thirds of BNPL users have used the payment solution more since the pandemic started, according to a recent survey published by The Ascent. Among these respondents, 41% used BNPL to conserve money in the event of an emergency, while 25% did so because they lost income and needed a way to make purchases.
The rationale for choosing BNPL at checkout varies by consumer, but price is the most common consideration for shoppers when deciding whether to use a BNPL payment solution. Of the online shoppers surveyed by Bizrate Insights, 43% said their main reason for considering BNPL would be to make high-priced items more accessible. Notably, 52% of all Gen Z shoppers surveyed said they would consider using BNPL for that reason — the highest percentage of any other age demographic and 11% more than Baby Boomers.
How Buy Now, Pay Later Affects Consumer Shopping Habits
The frequency of purchases consumers make using BNPL is on the rise, according to The Ascent survey. Of the over 2,000 Americans surveyed in March 2021, 36% reported using BNPL at least once a month — up from 30% in July 2020. The same study also revealed the percentage of consumers purchasing with BNPL at least once a week increased from 12% to 18% in the same time frame.
In addition to making frequent purchases, consumers are also showing a willingness to spend more with BNPL. Bizrate Insights’ survey found 35% of online shoppers would consider paying more in a single transaction if they could use BNPL at checkout.
Economic hardship and the rapid adoption of ecommerce spurred by the pandemic have led more consumers to take advantage of the financial flexibility BNPL payment solutions help create. With millions of consumers still facing economic uncertainty, offering a BNPL option at checkout can be a practical solution for ecommerce retailers looking to keep customers engaged and returning to their online stores.
The Buy Now, Pay Later Stats Ecommerce Retailers Need to Know
Are you still unsure if buy now, pay later is a good fit for your ecommerce strategy? As more and more consumers choose BNPL at checkout, it’s crucial to understand how the payment solution influences shopping behaviors.
To help ecommerce retailers understand BNPL’s full impact, we developed a free infographic using data collected from a May 2021 survey of over 6,000 online shoppers. Download “Buy Now, Pay Later: Consumer Stats Retailers Need” to learn how and why consumers use BNPL.