Buy Now, Pay Later Trends to Watch in 2022
‘Proceed to checkout’ at any of your favorite retailers, and you’ll find that you no longer need to pay immediately in full. Buy Now, Pay Later is shaking up the shopping experience by allowing customers to access short-term lending options right in the confines of the buy now box. What started as just another logo next to the pay button that you could easily overlook is now expected to explode into a $3.98 trillion industry by 2030.
Here are three trends retailers are keeping an eye on as this payment method sweeps the digital aisles.
Preferred payment methods become the new loyalty driver
Consumers adore innovations that make remote work more manageable, dinner orders effortless, and, in the case of Buy Now, Pay Later—make payments easier. There’s no need to sift through a myriad of credit card offers or wait through a days-long approval process. With BNPL, the approval process is baked into checkout for a seamless, distraction-free experience.
Customers will come to expect this type of experience at checkout and shy away from retailers that ignore the trend. Some experts predict that instead of chasing brands, shoppers will transition their loyalty over to preferred payment methods.
It’s not an entirely new strategy. Department stores like JCPenney first wooed shoppers in the late ‘50s with private-label credit cards. Storefronts in the 1980s lured Visa clients by plastering “it’s everywhere you want to be” stickers on their front door. Now, retailers are using BNPL as the incentive—and it works. A whopping 87% of customers are still actively using their preferred BNPL method 12 months after their first use, while only 55% of store-specific card users continue on.
The shift to ‘convenience’ as a prime purchase motivator shouldn’t come as a surprise—in modern retail, convenience is king. Customers are now more experience-loyal than ever: 76% say they are more likely to make a purchase from a merchant that offers a seamless point-of-sale experience like BNPL. It’s a “build it and they will come” mentality. Make it as easy as possible to buy, and shoppers will keep coming back.
Younger generations will continue to gravitate towards Buy Now, Pay Later at checkout
Generation Z makes up the bulk of BNPL users, with 44% opting for split payments at checkout. Amongst Millennials, 37% are expected to pay with BNPL this year. Raised with negative connotations toward carrying credit card debt, many younger shoppers are leery of engaging with traditional lending models.
This makes them a prime candidate for BNPL: ensnared by student loan debt and stifled wages, younger shoppers aren’t interested in a traditional revolving credit arrangement. Instead, they prefer the one-and-done payment plans offered by BNPL, where they can swiftly pay off a purchase in a fixed, often interest-free, predictable timeframe.
But the younger skew doesn’t entirely exclude older demographics—almost 10% of Baby Boomers are expected to buy now and pay later this year.
Buy Now, Pay Later expands into more industries
McKinsey estimates that Buy Now, Pay Later has diverted between $8 and $10 billion in revenue from traditional banking lenders—and it’s doing so by capturing more than social media-driven impulse buys. Mammoth e-commerce retailers down to handmade candlemakers are now offering a variety of payment options at checkout. The option is now available across industries like airfare, hotel stays, consumer electronics, furniture, jewelry —even medical procedures.
The financial gurus at Accenture predict that 13% of all online transactions will involve BNPL by 2025. Retailers that integrate with a BNPL provider will not only grab the attention of this new cohort of shoppers, but they’ll enjoy a substantial lift to their average order—between 30% and 50%, according to RBC Capital Markets. If you’ve viewed BNPL as just a quirky trend at checkout, it’s time to have another look.