While buy now, pay later (BNPL) options have been around for some time, a confluence of factors accelerated its popularity in 2020. From the double-digit growth of online shopping and preference for cashless (and touch-free) transactions to a desire for greater payments flexibility and convenience, BNPL is poised to see continued growth this year and beyond.
This is good news for brands, retailers and consumers who value a friction-free shopping experience. The growth of BNPL is an immense opportunity to win new customers and grow the base of loyal shoppers.
But opportunities in BNPL also come with some challenges. In this executive briefing report, we will look at how the recent holiday shopping season shaped demand for BNPL and why it attracts consumers (especially Millennials and Generation Z). This report will also look at the role that trust and credibility play in a crowded and growing field of BNPL providers.
Twenty-twenty was a turning point in so many ways. The COVID-19 pandemic rapidly transformed how people live, work and play. When the pandemic struck last spring, thousands were left out of work. Families huddled in their homes, working and learning and trying to adjust to a new way of living.
As physical stores temporarily shuttered their doors, consumers flocked to online sites to buy essential goods and necessities. Essential large businesses remained opened and created a socially distant and safe environment for consumers to shop quickly and efficiently. Cashless and contactless transactions were the preferred method to shop along with curbside pick-up.
As retailers slowly re-opened, consumers remained cautious and continued to be wary of physical stores. Online, though, consumers switched from buying only necessities to doing most of their shopping on retail websites. By the fall, and an imminent second wave of the pandemic, shoppers fully embraced online shopping (resulting in double-digit e-commerce growth), seeking out new brands and also making major purchases.
Prior to these changes in consumer behavior, the market was also experiencing significant shifts in how, where and why consumers shop. With financial transactions, Millennials and Gen Z want flexibility and convenience, preferably in the form of an app. They also demand transparency and value trust. For example, according to research from Netfluential, 71 percent of consumers are more likely to trust businesses that offer their preferred payment method while 81 percent of shoppers have already decided which payment to use even before they reach the checkout. In regard to trust, that same study found that 78 percent of respondents rate security above convenience when shopping online. And when asked about the top factor when paying online, 79 percent of those polled said it was trusting “that their financial information is secure.”
All of which created the perfect conditions for BNPL to grow and evolve. But that growth, as we will see, comes with challenges — not only for consumers, but for retailers and brands as well.
In a special executive briefing report, WWD Studios teamed up with PayPal to look at the rapid emergence of “buy now, pay later,” why trust in a financial services provider is more important than ever as online sales continue to grow, and consumers flock to cashless payments.
To discover more insights from PayPal with Greg Lisiewski and WWD, register for The Power of Pay Later digital event here.