Why is Consumer Behavior Shifting Toward Buy Now, Pay Later?

A 2022 Lending Tree survey found that 43% of people used BNPL — up from 31% in 2021.

By Ian Nadeau December 7, 2022
why is consumer behavior shifting toward buy now, pay later?

Analysts project this holiday season to be the closing chapter on an era of record sales for eCommerce. Fluctuations in the economy have negatively impacted consumer sentiment, making them more conservative spenders. While shopper turnout was at an all-time high this Black Friday, many of those purchases were made using a buy now, pay later (BNPL) option. 

Data by PYMNTS shows that 10.2% of Black Friday sales were financed using BNPL, which is a 2% rise over 2021 and a nearly 7% increase from 2020. Further, Adobe found that buy now, pay later payments through industry leaders like Klarna, Affirm, and Zip surged by 85% from Black Friday to Cyber Monday when compared to the week before. 

Why is consumer behavior suddenly shifting toward buy now, pay later? Understanding the rapid rise in usage of BNPL requires knowing who is leveraging it and what they’re financing. 

Who Uses Buy Now, Pay Later?

Younger shoppers — millennials and Gen Z — were the biggest users of buy now, pay later financing during the Black Friday weekend. BNPL appeals to these two segments due to their fixed payments, little to no interest, and simplicity of the approval process.

Also, while credit cards can be exclusionary to younger shoppers, most qualify for BNPL financing. For example, Klarna only asks that their customer meets the age requirement (18), doesn’t have a lot of debt, has a positive credit history, and is able to connect their bank account. This ease of access grants greater purchasing power to those who have yet to build up their credit. 

Why Buy Now, Pay Later? 

Buy now, pay later plans allow shoppers to stretch out their cart into equal payments over time — many providers even offer multiple BNPL options for further flexibility. Breaking items down into multiple pieces makes bigger purchases (e.g., furniture and electronics) more obtainable to more consumers. 

Forbes Advisor and OnePoll surveyed 1,000 U.S. consumers who have tried BNPL at least once — asking what they’ve experienced and how they view the popular financing option. The survey found that the main reason (66%) for using BNPL is reducing the impact of a big purchase. The second reason (51%) is being able to purchase an item that the shopper can’t currently afford.

Surprisingly, 70% of those surveyed said they would consider buy now, pay later for everyday purchases, not just major ones (one in five respondents would even use it for a purchase under $50).

Buy now, pay later is impacting how people spend. Seventy percent of those surveyed by Forbes Advisor said that they spend more than otherwise planned when using BNPL, with one in four justifying its use for an impulse purchase. As buy now, pay later grows in popularity for carts of all sizes, eCommerce brands need to integrate with a provider to avoid missing out on potential sales. 

Benefits of Buy Now, Pay Later for eCommerce

Americans consumers spent over $9 billion this Black Friday — with 10.2% ($900 million+) of those sales stemming from buy now, pay later transactions. The growing usage drives home why eCommerce brands need to consider BNPL as part of their payment offerings. More than increased sales, integrating your eCommerce site with a buy now, pay later provider can also attract new customers, enhance the customer experience, and boost customer lifetime value. 

Attract New Customers

Allowing consumers to get what they want without committing to the full cost upfront opens the door to more consumers wanting to buy your product(s). Pairing buy now, pay later with free shipping and returns can further build your customer base by removing much of the risk that comes with trying something new. 

Enhance the Customer Experience

Did you know that 64% of consumers say that customer experience is more important than the price of your products? Additionally, 76% of shoppers will stop spending at your business after just two negative experiences. Nothing provides a better customer experience than taking the friction out of the purchasing process. Make the experience of getting your products simple by providing flexible payment options so that all segments can complete their order. 

Boost Average Order Value

Buy now, pay later provides greater flexibility when purchasing big-ticket products — allowing more consumers to complete large orders. Take the sticker shock out of large purchases by enabling consumers to break up their cart into equal installments. This can boost the average order value as it empowers shoppers to buy more, but pay less at the moment.

The increase in usage of buy now, pay later can be explained by the Forbes Advisor and OnePoll survey, which found that 43% of those who use BNPL don’t view themselves as being in debt when selecting the option to defer payment; a number that jumps to 51% for Gen Z consumers. This shows that customer sentiment toward buy now, pay later is more positive than credit cards, which nearly 75% of Americans say can negatively impact their mental health. With BNPL growing in popularity, brands need to consider adopting it into their eCommerce marketing strategy.

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