Millions of Americans have started using buy now, pay later (BNPL) services over the last decade, making it one of the fastest growing developments in retail. Financial uncertainty spurred by the pandemic only accelerated its adoption: according to an analysis from Adobe, the use of BNPL—the option to pay for goods over time in installments—grew 215% year over year in the US during the first 2 months of 2021.
Who’s driving the trend? Millennials and Gen Z, with 21% and 17% respectively already using BNPL services regularly.
So what is BNPL, why does it matter, and how could it help your business? Here’s 10 facts about one of the fastest-growing trends in retail right now.
1. BNPL leads to bigger checkouts.
Retailers who offer BNPL options at checkout, both online and in-store, see an increase in average order value (AOV) of around 45%. Consumers crave the flexibility to pay in a more convenient way and so take advantage of the change. Meanwhile, retailers get paid upfront and in full. That’s a win-win-win.
2. Payment options like BNPL turn browsers into buyers.
Driving traffic to your online store is hard enough, but converting those visits into actual sales is an ongoing challenge for businesses of all sizes. With the flexibility of BNPL, 44% of shoppers on average decide to make purchases they might have otherwise delayed.
3. Full shopping carts, not abandoned ones.
There’s nothing more frustrating for a retailer than deserted shopping carts, discarded by shoppers for a whole host of reasons. Rather than spending money on multiple follow-up marketing methods and persuasion tactics, BNPL increases orders and leads to fewer dumped carts.
4. More ways to pay equals shoppers purchasing more often.
For shoppers, being able to split their purchase into multiple interest-free payments means they don’t have to pay the full amount upfront, giving them financial flexibility and leading to more purchases in the long run. Plus, BNPL enables people to more easily purchase big-ticket items—instead of saving up to buy, they can get the items they want now, and still pay in a way that meets their budget.
5. Happier customers for your business.
Whether it’s being able to more easily purchase premium goods, avoiding debt from credit card interest payments, or just getting things they want now without waiting, BNPL gives customers a choice at checkout they never had before. And with over 40 million people using BNPL products in the US, that’s a lot more happy customers for your business.
6. Shoppers love rewards.
Rewards programs are great for consumers: they feel valued, and that encourages them to purchase more frequently and recommend your brand more often. Considering repeat customers spend around 67% more than first-time buyers, that’s a massive opportunity for a sales increase. And customers love rewards programs, 57% of them will actively engage with a rewards program because they like getting extras and discounts when they shop, and 37% will join just to earn points for future purchases. However, managing a rewards program often means increased time and marketing dollars that may not be possible for a small business. One BNPL service we hear is pretty great, Klarna (😉), is the only BNPL provider to offer a built-in rewards program that rewards your customers for every dollar they spend.
7. Shoppers prefer to stay within trusted ecosystems.
Back in the day, shoppers were extremely loyal to their favorite retail centers; “let’s go to the good mall” they’d say. While malls may not be the centerpiece of retail anymore, shoppers still prefer to remain within a trusted space with verified vendors. Users of shopping apps like…you guessed it—Klarna, are actively looking to use the benefits of flexible payment options at checkout wherever they can. Retailers offering BNPL options encourage those browsers to become buyers—and they do! Klarna users, for example, have a 36% higher purchase frequency than regular shoppers.
8. Credit cards are so 20th century.
The weight of debt has become so taboo in Millennial and Gen Zers’ minds that many of them actively avoid relying on credit in any way. Recent studies have found anywhere from 23-49.7% of Millennials and Zers don’t even have a credit card, preferring to use debit cards instead. For younger shoppers, BNPL options like Pay in 4 provide all the flexibility of a credit card, without the worry of increased debt, and with zero interest payments.
9. BNPL is the new normal.
Millennials and Gen Z are vigorously interested in changing the status quo and are attracted to new, better ways of doing things. They welcome startup and tech companies who provide new solutions for old problems. Over 26% of Millennials and almost 11% of Gen Z shoppers have used BNPL to finance their most recent online purchases, as compared to 7.5% of older generations. The number of people using BNPL continues to rapidly grow year-over-year across all demographics, and using paying in installments is quickly becoming their preferred method of checkout.
10. Klarna has the best BNPL options for your customers.
If your business wants to boost sales, attract shoppers, and build customer loyalty, then Klarna has the best solutions for you. For all the benefits that shoppers get using BNPL, one of the biggest advantages for a retailer is that no matter how a customer purchases, the retailer is always paid upfront and in full. Nothing changes for the retailer in terms of when they get paid and consumers get more options to choose from; that’s a win for everyone.