Consumers spent a lot more time shopping online during the COVID-19 pandemic, and the popularity of ecommerce only continues to rise. With that rise comes a host of new online payment and financing options, including the point-of-sale financing option known as Buy Now, Pay Later (BNPL)
As an increasing number of consumers embrace the ease and flexibility of BNPL, brands like Target and Wayfair are scurrying to offer the service to their online customers — and it might be time for you to do the same.
If you are a merchant looking to learn more about alternate or additional payment methods, we have you covered. Check out these 10 facts to find out if BNPL could be right for your ecommerce store.
1. Usage Has Tripled Since 2019
The worldwide popularity of BNLP has skyrocketed over the past few years. Take the U.S., for instance, where BNPL usage has tripled since 2019. And while most users are on the younger side (Millennials and Gen Z), the number of older users is increasing, too.
2. 36% of U.S. Adults Already Have a Preferred BNPL Service
As BNPL becomes more common, many banks and lenders are eager to get in the game. Yet the market competition is already tough. Case in point: In the U.S., 36% of adults already have a preferred service — and getting them to switch over to another provider could prove difficult. Merchants and ecommerce brands interested in offering BNPL can learn from these statistics by taking time to research and carefully choose their route to market.
3. 25% of U.S. Adults Use BNPL Because They Are on a Budget
Contrary to popular belief, not all BNPL users have a low income or poor credit score. In fact, the service is used widely across all different income levels, with 41% of users making more than USD $100,000 annually. Still, most consumers opt to use the service due to financial concerns. One study found that 25% of adults in the U.S. use BNPL because they’re “watching their budget.” On the flip side, 18% of people used the service simply out of curiosity.
4. BNPL Is Most Popular in Sweden and Germany
BNPL usage is growing in every corner of the world, but some countries are adopting the service at a much faster rate. As of 2021, 8 out of the top 10 countries for BNPL were in northwestern Europe, with Sweden and Germany holding the highest market share. Sweden’s service, Klarna, may be the main reason for the astonishing success of this eCommerce payment method in this region.
5. Global BNPL Transactions Are Expected to Increase to 450 Billion by 2026
The COVID-19 pandemic accelerated the adoption of alternate payment methods, with transactions increasing 400% from 2019 to 2021. Many forecasters expect that initial momentum to keep rolling forward, with transactions expected to reach 450 billion by 2026. Yet it is worth noting that others are sceptical about the lasting power of BNPL. Klarna CEO Sebastian Siemiatkowski recently said that rising inflation and the war in Ukraine have caused a noticeable decline in consumer spending, leading the company to cut down on its staffing by 10%.
6. 56% of BNPL Users Prefer the Service to Credit Cards
Though BNPL services offer benefits similar to a credit card, many users say they prefer point-of-sale financing. In fact, one survey found that 56% of respondents would choose BNPL over a credit card, and 38% of respondents say BNPL services “will eventually replace their credit cards.” These users think BNPL is a better option for a host of reasons, including ease of making payments (45%), flexibility (44%), lower interest rates (36%) and easy approval process (33%).
7. Electronics, Clothing and Furniture Are the Most Popular Uses of BNPL
Consumers use BNPL for all types of purchases, from everyday household products to bigger ticket items. Yet three categories top the charts when it comes to usage: electronics (48%), clothing/fashion items (41%) and furniture/appliances (39%). Household essentials like cleaning supplies and toiletries follow close behind at 33%, and books, movies and games stand at the bottom of the list, making up 23% of all BNPL purchases.
8. Klarna, Afterpay and Affirm Are the World’s Most Popular Services
Ultimately, the popularity of BNPL service providers varies considerably from one country to another. While one survey found that PayPal Credit is the most popular service in the U.S., worldwide insights show that Klarna, Afterpay, and Affirm are the most popular service providers globally. Understandably, Sweden-based Klarna is most popular in Germany and Sweden and Australia-based Afterpay is most popular in Australia and New Zealand. Though all three of the top players have millions of users, Klarna ultimately tops the list when it comes to the number of users.
9. BNPL Can Be Risky for Consumers and Financial Institutions
Even as BNPL becomes more widely used, it is worth noting that the payment model presents risks for both consumers and the financial institutions that offer the service. According to McKinsey research, all point-of-sale financing options can lead to debt accumulation, and the lack of regulations in the market can cause consumer protection issues. Many services lack transparency surrounding data collection and usage, leading countries like Australia and the U.K. to voice concerns about the potential issues.
10. Australia Is Leading Innovation
Australia is leading much of the innovation in the BNPL market, which comes as no surprise, since it is home to some of the earliest adopters and service providers. According to one article by Deloitte, leaders in Australia’s BNPL space say the future of the industry is all about offering an elevated customer experience and providing clear value to customers. They also cite fixed term instalments as a leading trend for the future, and say the market will continue to expand dramatically on both the consumer and merchant side.
Add BNPL to Your Ecommerce Store
Want to add BNPL services to your ecommerce store? If so, EWS can help. We offer a host of customer-preferred payment options, so you can create the checkout experience customers around the globe will trust and love. Get in touch today to learn more about how ESW can help you take control of your DTC sales channel.