BNPL is an important tool for non-retail traders
Gone are the days of retailers asking “cash or credit?” Consumers are increasingly looking to use new payment solutions, such as buy now, pay later (BNPL), for almost everything they buy, big and small.
Global Pay Later Products PayPal vice president Greg Lisiewski said in an interview with PYMNTS TV that the pandemic has accelerated the adoption of BNPL by consumers and businesses.
“On the merchant side, we’ve really seen it penetrate most verticals – not yet as widely adopted as in fashion and apparel, but it’s getting there,” Lisiewski said. “[Offering BNPL] is the stakes of the table.
Over two-thirds of non-millennials and millennials use PayPal’s Pay in 4 product, and the funding option has shifted from clothing and beauty retailers to other categories, such as than the automobile and travel. PayPal was an early supplier to BNPL when it acquired “Bill Me Later”, although this was primarily aimed at larger purchases. Lisiewski estimated that around half of e-commerce is now covered in one way or another by a BNPL solution.
The non-commercial case for BNPL
Anthony Rodio, president and CEO of mobile auto repair provider YourMechanic, said BNPL is an “extremely important part of our offering” given that the average car in the United States is over 11 years old and the car average maintained by YourMechanic is about 12 years old. .
“A lot of our customers don’t have an extra $ 300, but they need their car,” Rodio said. “It’s the only way for them to make a living, whatever that job. They need this vehicle and they may not be paid for a week or two. So buying now, paying later allows them to continue to live and work.
The PYMNTS study, conducted in conjunction with PayPal, found that 32% of BNPL users said they couldn’t afford a certain purchase without it, and nearly 39% said they used it because they knew what the monthly payment would be and for how long. About 29 million American adults have used BNPL in the past 12 months.
Separate research also found that more than 60% of millennials in the United States are living paycheck to paycheck as they begin to incur larger expenses for the first time, be it buying money. a car, taking out a mortgage, or preparing to have children.
Read more: 43M US Millennials Bring Living Paychecks To Paychecks
About 30% of YourMechanic’s customers use BNPL to fund auto repairs, which Rodio said initially surprised the company as the average order value was less than $ 200.
“We are dealing with people without a lot of disposable income, and they need help with all the plethora of anything,” Rodio told PYMNTS.
Sam Argyle, managing director of travel booking platform Alternative Airlines, said BNPL is growing rapidly within its industry as well, with people now expecting the payment option to be available when booking flights. ‘a travel. Alternative Airlines offers more than 40 payment methods, including credit cards, e-wallets and cryptocurrencies, to meet the range of purchase sizes in the travel industry – from a ticket to 550 $, which is good for a bi-weekly installment option, to a $ 2,000 trip to Hawaii, which may fit better with a six-month or 12-month option.
Argyle said the company has seen “huge traction” for BNPL when it comes to unbudgeted and unplanned travel.
“Typically, you might have saved up for your two week vacation somewhere, but the last minute unplanned trips that can fund them over a period of time really resonate with customers,” he said. declared. “And working with many of the top Buy Now, Pay Later offers on our site gives customers real credibility and confidence to book through us.”
Align spending with cash flow
As the use of BNPL has spread in the connected economy, one of the big advantages, Lisiewski said, is that “it really is a democratized solution for traders of all sizes,” beyond where traditional point-of-sale (POS) finance resides. Previously, funding options were limited to high margin vertical niches such as furniture and big box stores, which dealt with banks and created private label cards with funding in the center.
“But now you can be the Main Street hardware store that has survived all the consolidations in retail and now offers buy-it-now, pay-back solutions where your customers used to go to The Home Depot or Lowe’s if the funding was important for the purchase, ”Lisiewski mentioned. “Think of the bridal shops – any small regional business is really in a great position.”
BNPL could also begin to appear in non-discretionary categories beyond auto repair, Lisiewski added, specifically highlighting the possibility of smoothing rent payments.
“Everything that comes down to aligning spending with cash flow, I think, is good for consumers,” he said. “And you’ll start to see these solutions penetrate other non-business verticals, but big expense categories. “
Rodio said customers are also seeing the benefits of BNPL as it becomes more ubiquitous.
“Consumers understand this because they feel the pain of not having the opportunity to make unexpected expenses, and they know they need it,” he said.
The challenge, he added, is to convince service providers to adopt BNPL. Plumbers, electricians and other tradespeople often work primarily with cash as they hire labor based on the job, making it difficult to set up a financing solution.
“Part of it will be an education in a service market type mentality, the side offers benefits of additional demand,” Rodio said. “I know it happens, but they were a little reluctant.”
The next frontier
Lisiewski said he expects the use of BNPL to continue to grow, although consolidation within the space is virtually guaranteed “because there just isn’t enough room.” . In early August, for example, Square agreed to acquire Afterpay for $ 29 billion.
“I think if we move quickly from 18 to 24 months, the category will continue to grow,” he said. “I think there will just be fewer players offering solutions to cover all kinds of use cases. And who knows? Maybe someone we haven’t heard from yet will find a new benefit in a different use case.
Argyle said BNPL is growing, however, it is important to strike the right balance between responsible lending rates and approval rates. As a trader, Alternative Airlines wants to see approval rates as high as possible, “but we strongly believe in responsible lending and the message to be given to those who can pay it back,” he said.
“It’s just this constant compromise between the two because we need to see high approval rates for sales, but we also want to see repeat business from customers,” Argyle said. “And therefore responsible lending must also take place. “