Sound familiar? Credit card providers made the same claims when credit cards were launched. BNPL providers like to claim that they help merchants make sales that wouldn’t have been made otherwise. Consumers’ choice of BNPL provider is dictated by which provider the merchant they’re buying from chooses to work with.Ģ) BNPL providers will need to sharpen their sales attribution stories. No one BNPL provider will emerge as having a monopolistic market share. Too early to make a call, but a couple of thoughts here:ġ) It’s not a winner-take-all game. Number of Buy Now, Pay Later users in the US Source: Company reports, Cornerstone Advisors estimates In terms of US users, PayPal Credit has far more users than its competitors-but, but by virtue of its 2008 acquisition of Bill Me Later, has been in the game (US-wise) far longer than anyone else. ![]() The provider landscape battling it out for the $24 billion in BNPL-related purchase volume in the US is crowded. The fact that “losing track of the payment” was the most frequent reason for late payments suggests that many BNPL users are in over their heads from an inability to manage their money efficiently -not from an inability to pay-perspective. They have every intention to pay off the purchases on time, but want to cap their monthly expenditures. But that doesn’t apply to all BNPL users, and ignores another important fact: Four in 10 BNPL users said they used the service to purchase products costing less than $100.įrequent users use BNPL for psychological money management and budgeting reasons. So what’s the real reason driving a small percentage of consumers to run up so many BNPL purchases?įor some, it’s certainly a case of hitting the credit limit on their credit cards. And most-if not all-BNPL providers run a credit check on a BNPL purchase. Two of the most popular BNPL providers-PayPal and Affirm-charge interest rates that are certainly as high as any credit card. ![]() ![]() The three most-frequently cited reasons for using BNPL according to a study from The Ascent is to: 1) Avoid paying credit card interest 2) Make purchases that otherwise wouldn't fit in my budget and 3) Borrow money without a credit check. So the reason for the popularity of BNPL isn’t the lack of credit cards. This data point is echoed by Adam Ezra, CEO of Quadpay, in a article.įolks, that data point comes from a 2016 study by .Īlthough there are many people who would like to pretend that the past four years never happened, a lot has changed since then: Today, two-thirds of Millennials have a credit card, as do 57% of Gen Zers between the age of 21 and 25. “One potential reason for the acceptance for BNPL is because young people just don’t have credit cards-only 33% of those between the ages of 18 and 29 are toting plastic.” Why Do Consumers Buy Now and Pay Later?Īn article on Merchant Maverick from August 2020 states: This may be forcing some of them to use BNPL programs. Just a third blame it on not having the money to pay the bill.Ģ) More than half of BNPL users have seen their credit card limits decreased in the past year. But two-thirds of them said it was because they lost track of when the bill was due. Overall, Millennials account for half of all consumers who have used the service in the past two years.Ī couple of warning signs, however, support the critics’ claims.ġ) Over the past two years, 43% of BNPL users have been late with a payment. Among all Millennials (26 to 40 years old), 18% made at least one BNPL purchase over the past two years, in contrast to 9% of Gen Xers (41-55), 6% of Gen Zers, and 1% of Boomers and Seniors. This means that BNPL users have other mechanisms to get themselves into debt. ![]() The notion that consumers are using BNPL programs because they can’t get (or don’t have) a credit card is nonsense: 97% of them have at least one credit card. They’re highly educated as well-three-quarters have a Bachelors degree or higher. Seven in 10 BNPL users earn more than $75,000 a year. “There is a risk that buy now pay later schemes may attract people who are already in financial difficulties and may be struggling to make their existing bills and payments.”Ĭornerstone’s research found that 80% of BNPL users say they always pay their bills in full and on-time and make their loan payments most or all of the time.
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