Buy Now Pay Later (BNPL) is a growing global trend many businesses have adopted in their payment offering for their Ecommerce. The popularity of this alternative payment method brought many companies to make this choice in order to be competitive in the market. Nowadays customers are more and more tech-savvy and look for methods they are accustomed with and that can simplify their payment process. Buy Now Pay Later providers allow customers to buy a product while paying overtime in instalments. Not only, most BNPL options are interest free for the customer. This payment method has huge repercussions on Ecommerce sales for merchants because it allows them to reach customers who may not have money availability at the moment or that do not feel comfortable with paying the full price in one go. In this article we’ll see all the other BNPL benefits for merchants when offering this alternative solution at Ecommerce check-out and how this is can lead to increased customer loyalty. However, let’s first take a look at the repercussions of BNPL on the Ecommerce landscape worldwide and specifically in the UK.
Instead of slowing down its growth, the covid pandemic has positively influenced the BNPL’s market. In fact, interest-free loan solutions during times of economic uncertainty can support customers in their bigger purchases by giving them the right security for larger investments. Moreover, in the past years the BNPL market has continued to grow; data from Worldpay show an increase from 1% in 2016 to 8% in 2022 for domestic payments in the UK.¹ In fact, Buy Now Pay Later is a trend-setter and continues to gain market share worldwide: from 2.9% of the global value of Ecommerce transactions reached in 2021, Worldpay forecasts indicate that it will grow to 5.3% by 2025.² A market that shows no signs of slowing down, with a size that is set to reach $3268 billion by 2030 from the $125 billion total in 2021.³
Moreover, consumer credit volumes in general are growing across Europe and, according to data from the European Central Bank (ECB), the European average of credit disbursed stood at around EUR 731 billion in July 2023, after a slight decline from its peak of almost EUR 704 billion in November 2021, figure that has continued to grow since March 2023.⁴
Given these volumes, it is not surprising that more and more companies are jumping on the BNPL bandwagon. At the moment, big names such as Klarna, PayPal Credit, Affirm and AfterPay are all market leaders. But banks are also approaching this world, as they look at this sector as a business opportunity.
Regarding the target audience, although Millennials and Gen Z are the generations that use this payment method most often, in the UK respectively 48% and 21% of the target BNPL users, 24% are from Gen X (born from 1965 to 1980) and 6% Baby Boomers (1946-1964).⁵ Younger generations are more inclined to quickly accept and use new payment methods and adapt to change, but they are also more active on social media, where the biggest BNPL brands like Klarna are mostly focusing their marketing campaigns. Therefore, although providing a BNPL option at check-out is a good idea for any target audience, if the target is young customers this should be a must.
One of the main strengths of Buy Now Pay Later is that they give a solution to what in the business and marketing world is called “pain point”, a specific problem experienced by a prospective customer. In fact, people can find themselves in need to make large purchases in time when they don’t have financial availability to do so. Big expenses like electronics can add up to other expenses like utility bills, car check-ups or household renovations, just to name a few. Being able to provide flexibility of payments through varied payment methods and interest-free loan options at check-out builds trust and increases customer loyalty for your Ecommerce.
The BNPL benefits for merchants are many and varied: from an increase in sales to lower return rates. Let's have a closer look at them:
Finally, BNPL is an important payment method to add to Ecommerce checkouts order to reach a wider public and to provide customers with the payment experience they are asking for. For Ecommerce that target younger populations this becomes a prerogative in order to remain competitive against competitors. Moreover, this can be a way to build trust and loyalty with customers and make the most of the reward programs BNPL companies are now building.
The Buy Now Pay Later solutions are part of the hundreds of alternative payments available with Fabrick's payment solutions, which can be integrated both online and in-store, to meet the needs of an increasingly omnichannel customer base. Dive deep into the world of Buy Now Pay Later and more: download our free whitepaper on alternative payment methods.
Market share of buy now, pay later (BNPL) | Worldpay, 2023
Buy Now Pay Later Market Size to Hit US$ 3268.26 Bn by 2030 | Precedence Research, 2021
Consumer credit in the Euro Area | European Central Bank data, July 2023, 2021
Statista Consumer Insights Global | 2023