Get insight into the rising popularity of buy now, pay later options

Sep 30 2021 | PayPal Editorial Staff

Given the unique circumstances across the globe over the past 18 months, it’s no surprise that the buy now, pay later (BNPL) space is growing.
In the first six months after PayPal introduced Pay in 4 in the U.S., the product has skyrocketed in popularity, driving $1 billion in total payment volume for the company, according to the company’s Q1 earnings release. 1
BNPL is not new, but uncertainty around the economy and finances has catapulted the payment option to the forefront of consumers’ minds. As interest continues to explode across markets and demographics, merchants are looking to understand the benefits.

Interest in Flexible Financing on the Rise Across Age Demographics

In the fall of 2020, PayPal launched a new set of global Pay Later options for consumers, including Pay in 3 in the United Kingdom, Pay in 4X in France, and Pay in 4 in the United States. Economic uncertainty brought about by the pandemic lead to a greater call for more payment options for merchants and consumers alike around the world.
The steep rise in BNPL popularity is demographic-agnostic, with 80% of BNPL users agreeing that seeing a BNPL message while browsing gives them the ability to spend more; 4 however, consumers under 30 are especially drawn to the payment option. More than one-third of PayPal’s buy now pay later sales  Pay in 4 (Pay in 3 in the UK)  are from consumers under 30.1 In a recent PayPal Newsroom articleDoug Bland, Senior Vice President and General Manager of Global Credit at PayPal, pointed out that consumers in this demographic “are gravitating to pay later services now more than ever,” adding that, “[BNPL] financing options fit neatly into the lifestyle consumers are already living.”2
This reality stands in stark contrast to the popular misconception that younger shoppers are hesitant to use credit to make purchases. A recent Forrester study, commissioned by PayPal, found that 48% of those in Generation Z (between the ages of 18-22) report they are comfortable or extremely comfortable using credit. An even greater number of younger millennials (ages 23-29) and older millennials (ages 30-39) report feeling the same way, to the tune of 60% and 69%, respectively.3
The pull toward BNPL options is so powerful that 50% of customers who used PayPal’s BNPL products used them again within three months, and 70% of customers used BNPL again within six months.“We’ve seen average order volumes more than double when compared to PayPal purchases that don’t use pay later…and merchants don’t pay anything additional to reap these benefits,” Bland said.2

Buy Now, Pay Later Drives Sales

BNPL provides shoppers with options and flexibility in how they pay, but it also enables retailers to boost sales and drive customer loyalty. The Forrester study found that 21% of sales come from BNPL options among the business-to-consumer (B2C) merchants polled.3
For merchants who remain unconvinced, a study by Netfluential and PayPal found that 28% of consumers between the ages 18-39 were more likely to shop at a merchant again if it offered a BNPL option.4 Given the competitive climate within the retail space and the proliferation of online marketplaces, the ability to differentiate can not only help bolster a merchant’s visibility but also sales and customer loyalty. “If using a commerce tool like pay later can increase consumer loyalty, it moves from a must-have to a foundational customer experience,” said Bland. 2
According to the Netfluential study, nearly a quarter (24%) of consumers report they also leverage BNPL to shop for more expensive items4 — a finding that is supported by the Forrester research, too. That study noted that seven in 10 younger consumers said they are likely to use BNPL for big-ticket items like furniture or other purchases greater than $1,000.3
Consumers have made it clear that they look for flexibility and choice in how and when they pay, with 70% reporting they are more likely to spend more at a merchant that offers their preferred payment method. 4 The question is whether or not merchants are paying attention and willing to accommodate these preferences. As we move into a post-pandemic world, merchants should remain especially cognizant of consumers’ preferred ways to pay.
“It’s pretty clear that having a BNPL option for consumers is not something that will vanish as we emerge from the pandemic. These options are now ingrained as a payment option for consumers and necessary for retailers to engage customers and convert purchases,” said Bland.2 
Fast Facts About PayPal’s U.S. Pay Later Solutions
Pay in 4: 6
  • Four interest-free payments every two weeks for consumers
  • Available on purchases $30-$1500
  • Included in PayPal Checkout at no additional cost
  • Merchants get paid up front and take on no additional risk
PayPal Credit:5
  • Digital credit line
  • 6 months special financing on purchases of $99+
  • Included in PayPal Checkout at no additional cost
  • Merchants get paid up front and take on no additional risk
For more information about getting buy now, pay later solutions from PayPal for your business, click here.
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.
1 PayPal Q1 2021 Earnings Call. Includes Buy Now Pay Later, Q1 2021 results for US, FR, UK and DE Installments.
2 PayPal Newsroom Article. Buy Now, Pay Later Has Been Around for a While. Why Is It Exploding Now? June 9, 2021.
3 A commissioned study conducted by Forrester Consulting on behalf of PayPal in November 2020, involving 504 U.S. consumers ages 18-39.
4 An online study commissioned by PayPal and conducted by Netfluential in November 2020, involving 1,000 U.S. online shoppers ages 18-39 (among BNPL Users, n= 357).
5 Subject to consumer credit approval
6 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.

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