Buy Now, Pay Later looks here to stay - and here's what you need to know

Aug 20 2021 | PayPal Editor

Buy Now Pay Later is firmly established in Australia and has become a regular way to pay for many consumers with potential to become even more popular. PayPal's Andrew Toon explains what businesses need to know.
Since Buy Now Pay Later (BNPL) appeared on the scene several years ago, it has gained significant traction with Australian consumers. Recent researchcommissioned by PayPal found that almost half of Australians who shop online (45%) have used BNPL, and over half of those BNPL users (51%) have two or more BNPL accounts. The research also reveals there’s headroom for consumer use of BNPL to continue to grow, particularly in certain verticals.

The adoption of BNPL is highest among younger online shoppers. Almost two thirds of Millennials (65%) have used BNPL, with Gen X (45%) and Gen Z (51%) not far behind. But older generations have started to use this payment option with a third of Baby Boomers who shop online (33%) reporting they’ve used a BNPL service.

BNPL use highest in retail, but use in other verticals expected to grow

Australian consumers chalk up most of their BNPL purchases in the fashion and electronics verticals, no doubt reflecting the early adoption of BNPL by these sectors. However, many consumers are interested in using BNPL to purchase a wider variety of products and services or help spread the cost of fees and bills.

More than a quarter of Australian online shoppers (26%) have used BNPL to purchase clothing and accessories, with this jumping to 43% for Millennials. The second most popular category for BNPL purchases is electronics and computing, with one-in-five (20%) using BNPL to purchase computers or electronics.



There is also clear interest among Australian online shoppers to use BNPL in other categories. For instance, over a quarter of Australian online shoppers say they have not used, but would consider using, BNPL for government charges such as council rates and car registration (32%), and for household bills (27%).

Security concerns top of mind, especially among females

Customer experience will become increasingly important as BNPL providers compete - with security, ease of use, speed and fees being important factors.

Security is top of mind for Australians when it comes to paying with BNPL, with three-in-five Australians (60%) prepared to abandon a BNPL purchase if they have security concerns. Women were more concerned about security, with 65% saying this was a concern compared to 56% of men. PayPal’s new BNPL service PayPal Pay in 4 leverages the same trusted security and protections which Australians have come to know and expect from the PayPal platform, making it highly secure. Additionally, eligible purchases made using PayPal Pay in 4 are eligible for PayPal Buyer Protection, meaning that PayPal can refund the full purchase price and delivery costs for consumers if something goes wrong with an eligible PayPal Pay in 4 purchase, such as if it doesn’t arrive, is faulty or counterfeit.

Ease of use is also an important factor for BNPL purchases with about half of Australians who shop online (53%) saying they’d abandon the purchase if the experience was too difficult or if the sign-up process took too long (50%).

Importantly, 50% of Australian online shoppers say they would not use a BNPL service that had high late fees. PayPal’s BNPL offering, PayPal Pay in 4, addresses this concern as it has no late payment fees for consumers in addition to having no consumer set-up fees and no interest on installments.

However, for businesses that can offer a secure, fast and easy BNPL experience with low fees, there are significant benefits. On average, online businesses offering BNPL reported an average of 31% of their sales revenue coming from BNPL purchases. And almost one-in-four businesses that offer BNPL (23%) say that over half of their online sales revenue, on average, results from sales using a BNPL service.

The benefits also go beyond sales and revenue, with merchants reporting that BNPL has increased their ability to attract new customers, drive repeat business and improve customer experience particularly among younger customers.


 
  • About the same (52%) have attracted younger customers due to implementing a BNPL service.
  • Almost 4-in-5 BNPL-enabled online businesses (77%) said they have seen an improvement in their customer experience due to implementing a BNPL service.
  • Two-thirds of BNPL-enabled online businesses (67%) said they have seen an improvement in customer loyalty due to implementing a BNPL service. Moreover, merchants offering BNPL reported double digit growth (10.2%) in terms of both average checkout value and conversion rate because of offering BNPL.
More businesses set to offer BNPL in the coming months

Against the backdrop of continued growth in online shopping, the number of Australian businesses offering a BNPL service is expected to increase. Forty percent of Australian online businesses (40%) say they already offer BNPL services, with another 18% either in the process of signing up, or intending to sign up, to offer a BNPL service before the end of 2021.

PayPal’s BNPL offering is also being delivered with no additional cost to business customers beyond their existing account arrangements. PayPal business customers can add PayPal Pay in 4 as a separate payment method and add dynamic messaging to their site to alert consumers that PayPal Pay in 4 is available. PayPal Pay in 4 messaging will dynamically show individual installment amounts based on what the customer is browsing or purchasing so consumers will know what each payment is likely to be. This dynamic messaging can be presented early in the shopping journey, delivering relevant, in-context pay later options from the homepage to product pages, to checkout.

As customers come to expect more choice and flexibility in online payments, businesses may wish to consider how they can adapt to the growing uptake in payment options such as BNPL. The research findings show that BNPL is not only important in attracting new customers and improving the customer experience, it’s also bearing fruit for merchants in driving checkout value, sales and revenue.

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1. About the research

Research commissioned by PayPal Australia Pty Limited (ABN 93 111 195 389 AFSL 304962) and conducted by ACA Research (ABN 66 001 598 558). Respondents completed an online self-completion survey, with a total of 1,008 consumers 18+ who shop online and use a smartphone, and 417 businesses taking part in the research. A cohort of Buy Now Pay Later (BNPL) users were also included in the research, with the ’BNPL Boost’ consisting of 761 Australian smartphone users 18+ who have used a BNPL service. This consists of the 445 BNPL users from the nationally representative sample, and an additional 316 BNPL users sampled to improve the statistical reliability of this cohort. The BNPL Boost sample was weighted in line with the characteristics of this audience within the nationally representative sample, and analysis of the BNPL Boost has a potential sampling error of 3.5%.

Sample was sourced through consumer and business research panels, with participants incentivised for completing the survey. The research was carried out in compliance with the AMSRS Guidelines and Australian Privacy Principles. Conducted 21 April - 3 May, 2021.

Generational Ages as at 2021: Gen Z (18-26 years); Millennial (27-38 years); Gen X (39-53 years); Baby Boomer (54-68 years); Older Australians (69+ years)



PayPal Pay in 4 is provided by PayPal Credit Pty Limited ABN 66 600 629 258. The PayPal service is provided by PayPal Australia Pty Limited (ABN 93 111 195 389) which holds an Australian Financial Services License number 304962. Any information provided is general advice only and does not take into account your objectives, financial situation or needs. Please read and consider the Combined Financial Services Guide and Product Disclosure Statement before acquiring or using the service.

 
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.