Buy Now, Pay Later (BNPL): A Credit Alternative to Accelerate Holiday Sales

Dec 02 2021 | PayPal Editor

While many consumers still rely on credit cards, the convenience and user experience of the Buy Now, Pay Later option is increasingly appealing, especially for larger ticket purchases and expenses that consumers want to make over the holidays.
One of the fastest growing products to come out of the pandemic is the buy now, pay later (BNPL) service which provides a convenient, credit alternative at the point of sale. The appeal comes from the ability to split larger purchases into smaller, more manageable payments over a period of weeks or months.

According to research by PYMNTS1, when asked about why they use a buy now, pay later option, 61 percent of consumers said they do so because the payment flexibility offers a better way to manage their spending on purchases through spreading out payments over time, with 42 percent saying they use BNPL so they do not have to worry about paying interest. Others want to avoid tying up their credit lines.

The research also found that roughly 11% of the population, or 29 million individuals, have used BNPL at least once over the 12 months prior to being published. More importantly, eight in ten consumers would prefer to make high-value purchases using buy now, pay later (BNPL) over personal loans or credit cards in the future. This represents 111 million consumers willing to finance everything from medical expenses to education or even high-ticket holiday purchases or holiday vacation costs with this relatively new credit alternative.1

Using BNPL to assist with the funding of a vacation was the most mentioned big-ticket item, with 28 percent of consumers saying they are ‘very’ or ‘extremely’ interested in making vacation- and travel-related BNPL purchases. Very close to the same percentage of consumers (27%) stated the same level of interest in using BNPL for medical procedures, with 26% saying they would use BNPL options for remodeling costs. 

As we enter the holiday season, the potential to use a solution like PayPal’s Pay Later products provide the ability for consumers to enjoy the holiday more while still staying within their budget. It also helps merchants at a time when they are needing strong holiday sales that suffered in 2020.
Source: PYMNTS | Amazon Web Services – November 2021 Digital Banking Report

The predictability of BNPL is a major benefit mentioned by consumers, especially among the 140 million U.S. consumers on tight monthly budgets and who live paycheck to paycheck, according to the PYMNTS study1 . In some cases, these consumers may need an easy financial option to pay monthly expenses on time. It was found that 61 percent of BNPL users seek this predictability to pay for purchases over a fixed period of time.

When asked to compare BNPL solutions to credit cards or a personal loan, 26 percent said they want to avoid locking up their credit lines for expensive purchases, especially when the expense will be enjoyed in the future, such as travel. In 22% of the instances, consumers need the BNPL option for high-value purchases since they have no other credit alternative. As we enter the holiday season, the possibility to provide an alternative financing option may be the difference between a sale and a customer looking elsewhere. For merchants already using PayPal Checkout, Pay in 4 and PayPal Credit2 are quick and easy to implement in the checkout experience, which can help drive those critical holiday sales.

Marketing the BNPL Solution to Potential Customers

According to data from a Citizens survey, 76% of consumers would be more likely to complete a purchase if merchants offer a simple and seamless payment plan.4 Therefore, businesses must be proactive in their holiday marketing to ensure potential buyers are aware that BNPL options are available well ahead of checkout. 

According to the PYMNTS research1, 57% of consumers who used a BNPL alternative in the last year found out about the option on the merchant’s product page as opposed to seeing the option at checkout. This is true especially for millennial and Gen X consumers, where 57% of millennial BNPL buyers and 62% of Gen X BNPL buyers discovered BNPL on retailers’ product pages. Online advertisements were the third-most mentioned way that consumers learned about BNPL options (31%). 

With consumers doing a great deal of their shopping on digital channels, it is wise to integrate the BNPL financing alternative as a major component of holiday marketing on websites, as part of high-end product marketing and even being a lead component for past customer reengagement. PayPal Pay Later products allow for easy promotion by allowing merchants to add dynamic messaging to their site in a single integration. 

Younger generations are likely influenced by word-of-mouth references to the BNPL solution, making it even more important for organizations to make the BNPL process easy and fast to use.
Source: PYMNTS | Amazon Web Services – November 2021 Digital Banking Report

Third-Party Providers Are Preferred Over Traditional Merchant Options

Interestingly, 59% of all consumers (153 million people in the U.S.) said they would use BNPL options from third-party providers, compared to just 20% who would use a direct merchant-offered solution.1 This highlights the importance of having an easy way to access an instant third-party BNPL option where the consumer trusts the brand and can integrate the payments with other credit choices. Younger generations are especially interested in using third-party solutions, with 67% of Gen Z and 74% of Millennials preferring third parties to merchant options.1

Twenty three percent of consumers surveyed prefer BNPL options offered by a recognized BNPL third-party provider1.Rated as one of the most trusted brand across buy now, pay later providers3, PayPal Pay Later solutions are not only a viable option, but easy to use – many times with a few clicks on their mobile device.

Collect Consumer Insights During the Holidays to Benefit for Years to Come

Merchants often look back on the holiday sales season and wonder how they can expand the relationship with brand new (and existing) customers throughout the year. The best way is to offer stronger financing solutions in return for deeper insights. These insights can provide the springboard for future sales.

When asked whether a consumer would be willing to share deeper insights into their credit history for better BNPL terms, 52% of BNPL users (or 21% of consumers overall) would be willing to do so. This is a major opportunity for providers to get additional insights at the point of purchase on consumers wanting to use a BNPL alternative.These insights can help build trust and an extended customer relationship that can increase the lifetime value of a customer.

Don’t Turn Away Holiday Shoppers Who Want to Buy High Ticket Gifts

At a time when many consumers are just getting back to a new level of normalcy after the pandemic, the ability to pay for higher-ticket gifts in extended, fixed installments provides some predictability to cash flow as well as some financial security. Beyond using BNPL solutions for in-store transactions, this credit alternative is increasingly being viewed as a viable credit solution for everything from clothing and accessories to higher cost gifts or even holiday travel. 

According to the research from PYMNTS1, businesses can benefit from offering flexible payment solutions if they enlist the help from commerce partners who offer BNPL services that consumers are likely to use online.1 By working with payments providers, merchants can also give customers the opportunity to share transactional data, which can help create a more personalized BNPL experience that suits the customer’s unique needs.  

Learn more about PayPal’s buy now pay later solutions HERE.



This article was written by Jim Marous in paid partnership with PayPal. 
  1. PYMNTS and Amazon Web Services (AWS), based on a census-balanced survey of 2,211 U.S.consumers conducted between June 23 and June 28, 2021.  
  2. About Pay in 4: Loans to California residents are made or arranged pursuant to a California Finance Lenders Law License. PayPal, Inc. is a Georgia Installment Lender Licensee, NMLS #910457. 
  3. PayPal Credit is subject to consumer credit approval.
  4. An online study commissioned by PayPal and conducted by Netfluential in November 2020, involving 1,000 US online shoppers ages 18-39.
  5. A online survey commissioned by Citizens and conducted by Mintel Comperemedia in June 2018, involving 1,837 adults.


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