One of the things youngsters like about the modern world is the liberty to manage their finances like they want to. With time, they are getting more financial liberty than before. A key offering that attracts young consumers these days is the ability to buy now and pay later. Many online retailers partner with financial services providers to let customers make purchases by making only a small upfront payment. Here we analyze why most young consumers choose to buy now and pay later.
The Analysis
According to an
analysis done by SIA partners,
the BPNL (buy now pay later) share of retail e-commerce and point of sale
transactions in the US was less than 2% in 2021, but it will probably double to
4% by 2025.
The Major
Players
As the BPNL is
proving useful and wide-reaching, many brands are entering this arena. The
latest on the list of new market entrants is Apple.
On Monday, the tech giant announced that it would offer financing options for
purchases made via Apple Pay.
The new service
will be called Apple Pay Later and available in the US in the fall. There is no
word yet on when this service will be available in Canada.
Understanding
BNPL
BNPL is offered
by many renowned providers like Klarna, Afterpay, PayBright, and Sezzle. It
resembles a point of sale loan where a consumer buys an item and then chooses
to pay for it via regular installments over a few weeks or months.
These services
are catching the attention of financial regulators all over the world. The
industry has only a few regulations currently and probably needs new ones in
the near future.
Not New?
Though many
people believe BNPL is a new concept, it's not. For many years, furniture
stores and car dealerships have offered no-interest financing options. BPNL
loans are getting more popular because they can be easily integrated with
online shopping platforms and allow the consumer to finance any purchase with
just one click!
The Success
Story
One of Canada's
BPNL service success stories is PayBright, which has partnered with over 5,700
retailers, including big names like Apple, Steven Madden, The Bay, etc., to
provide six-week interest-free installment plans. The website says that
PayBright has approved over $1.76 billion in consumer credits since its
inception in 2009.
How Do BPNL
Companies Earn?
Many people have
wondered how BPNL companies earn money. Though the business models vary from
one company to the next, most BPNL companies earn money by charging retailers
for purchases made through their services.
A Win-Win
Situation
According to
Klarna, a key player in the global BPNL sector and a Swedish fintech company,
consumers spend 45% more when they have the buy now pay later option. About the
same percentage of people would buy using BPNL now, but they would have delayed
the purchase if they didn't have access to BPNL. So, these services are a
win-win for retailers and consumers.
Sources:
https://www.cbc.ca/news/business/bnpl-young-consumers-2022-1.6397477
https://biz.crast.net/younger-consumers-are-choosing-to-shop-now-and-pay-later-as-more-companies-enter-the-financing-game/
https://www.iqstock.news/n/young-consumers-opting-buy-pay-companies-enter-financing-game-4012078/