Buy now, pay later, it’s now, not later
In retrospect, there are the trends, the seismic changes in the payments landscape that seem “obvious” that we may have spotted a mile away.
So think about buying now, paying later: arguably the most significant payments of the past year. The foundations, the tailwinds, were, and are, looking us straight in the face.
After all, with the economic uncertainty that has been a dominant and constant refrain in the midst of the pandemic, with a growing percentage of America’s population living off paycheck to paycheck – it stands to reason that consumers would adopt a fad. payment linked to the money they have on hand.
The visibility offered by installment payments on budget planning and cash flow management has particularly appealed to consumers who are suspicious or even unable to access traditional credit.
To that end, we could point to a few of the big deals, in the billions of dollars, that have marked the payment giants’ desire to gain a foothold in space. Over the summer, Square struck a $ 28 billion deal to buy Australia-based Afterpay. Affirm bought Paybright. Stripe bought Paystack.
You get the idea: The Stripes and PayPal’s of the world, once payments started, now buy upstarts.
We will get a better idea of how BNPL may have been viewed and used for holiday shopping in the weeks to come.
But as data from PYMNTS has shown, the growing willingness of payment providers to offer the option has led to strong double-digit growth until the start of the season, so there seems no reason to believe that growth does not start to continue to soar. the new Year.
To get a feel for the popularity of BNPL, PYMNTS found that 29 million Americans have used BNPL for at least one transaction in the past year. About a quarter of consumers earning between $ 50,000 and $ 100,000 per year are cut off from traditional credit channels, and 73% of “second chance” consumers who use or would use BNPL would be more likely to shop at a merchant offering this choice of payment. These second chance consumers are desirable, as 65% earn more than $ 50,000 per year, and 30% earn more than $ 100,000.
Do you think that the potential or current consumer of BNPL presents a credit risk? You could think again. The average second-chance consumer is 44 years old and has a FICO score of 662, just 38 points below the average “good” credit score, the data shows.
Read also: A study confirms the romantic correspondence between BNPL and “second chance consumers”
The inherent value of BNPL is that a significant number of users find that spreading payments over time allows them to manage their monthly expenses and avoid fees. In other words, there is visibility inherent in the model.
There are signs that traditional lending, as an industry, is interested in BNPL. At the end of December, the Equifax credit reporting agency is rolling out a plan next year to add Buy It Now, Pay Later (BNPL) plans to credit reports.
The year ended with some turbulence for BNPL, mainly in the form of regulatory oversight. The Consumer Financial Protection Bureau (CFPB) is currently investigating the issuance, reimbursement and fee policies of Buy Now, Pay Later (BNPL) brands. There are indications that the first trimester can be a bit bumpy.
The 16-page CFPB order states that “the Bureau monitors Buy Now, Pay Later (BNPL) products and consumer use of those products. This ordinance will provide the information necessary to perform such an analysis in accordance with the Congressional mandate that the Bureau monitors the risks to consumers in the offering or provision of financial products or services to consumers, including the evolution of the markets for these. products or services. Affirm, Afterpay, Klarna, PayPal and Zip have until March 1, 2022 to respond.
Read here: CFPB works with global regulators to target BNPL