A New Way to Shop: The Rise of Buy Now Pay Later Services

By Sandra Auren

The Catalyst

Since the rise of the pandemic in 2020, Buy Now and Pay Later Services (BNPL) such as Afterpay, Klarna, Affirm, and Zip started gaining popularity, especially amongst younger consumers who want to buy goods online but don’t have access to traditional credit. These interest-free loans are accessible via a mobile app linked to a bank account and allow consumers to pay for goods in weekly or monthly installments. Afterpay, one of the most popular BPNL services, doubled its sales in 2021, reporting $22.8 billion, a global increase of 102% over the last year.

The Rise

These frictionless and digital-first apps have made Gen Z and Millennials the top markets for BNPL, with 55% of Gen Z, 49% of Millennials, and 31% of Gen X having used a BNPL service in the past year. However, as inflation continues to impact households and the purchase of everyday items becomes difficult, more Americans are now using these services to pay for goods outside their initial purpose. Groceries, gas, trips and even weddings are now being parsed into installments. In fact, a study conducted by C+R in 2021 revealed that 51% of Americans had used BNPL services, and of those, 56% of them prefer to use Buy Now Pay Later Services to traditional credit cards.

A Global Trend

While the growth of BNPL services in the U.S. is growing rapidly, this could turn into a global trend, with countries like India and Australia experiencing a significant growth in sales and adoption.

In India, it is reported that 22% of all consumers have used one of these services, and sales are nearing the $7 billion mark. This success can be mainly attributed to the lack of access to credit for consumers across the country and the rise of e-commerce after the pandemic.

In Australia, the numbers seem to indicate a slower growth than in India or even the U.S., with a YOY increase of 40%, yet it is important to note that Afterpay has provided services to Australians since 2014, and the company continues to expand in the market.

Things To Consider

As the demand for BPNL services continues to grow, Marketers and brands need to consider these service partners as a critical element on their journey to conversion. Apps like Afterpay, Affirm, and Klarna are not only offering frictionless transactions and convenience in the digital space, but they are also providing flexibility for consumers’ wallets.