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Buy Now Pay Later (BNPL): Layaway with a New Look

Updated: Oct 13, 2021

BNPL shows the benefit of tapping into consumer needs

A new trend has emerged, thanks yet again to young Millennials and Gen Z, the move to buy now and pay later (BNPL). It is very reminiscent of layaway of yester-year and gives retailers and banking institutions major opportunities to present a new offer and attract younger consumers as they amass wealth. Payment providers like Affirm, AfterPay, and Klarna, have emerged and capitalized on an underserved market. BNPL offers opportunities to shop until you drop and worry about the bill later, without incurring interest like a credit card.

Presenting a new payment opportunity can make a world of difference for retailers climbing out of the pandemic, and also banks looking to widen their reach—and the market is already hot and set to grow in the future.

Don’t Call it A Comeback

BNPL is reminiscent of layaway but enhanced for the needs of today. Using BNPL consumers can have access to purchases immediately as they chip away overtime. Emerging payment players, like Affirm, are gaining in size and reach, presenting consumers with options across retail locations. And retailers are onboard, with a growing number supporting partnerships to embrace the BNPL trend:

  • Amazon and Affirm partnered. Amazon shoppers will be able to split purchases of $50 or more into smaller, monthly installments. Affirm said some loans will come with 0% APR, while others will bear interest.

  • PayPal will stop charging late fees on BNPL payments. Since its launch, more than 7 million consumers have used PayPal’s BNPL service, purchasing more than $3.5 billion of products.

  • Square acquired AfterPay. The deal will bring AfterPay’s merchant relationships into Square’s seller ecosystem and help to convert AfterPay’s existing customer base into Cash App users.

  • Apple announced a BNPL offering. Apple Pay users will be able to make interest-free BNPL purchases, choose any credit card to make the payments, and avoid late and processing fees with certain plans.[1]

This growing trend not only benefits the payment firms themselves but also the retailers are they can entice potential shoppers through more flexible options.

Financially Savvy Young Consumers are Driving Change

It is no secret that Gen Z (born between 1997-2012) are one of the most conservative generations since the Baby Boomer generation. Because of this, they are looking to save money and develop the best, budget-friendly options for spending. BNPL options are popular among both Gen Z and Millennials to finance those bigger purchases, while avoiding high interest rates often associated with credit cards.

Besides avoiding high interest rates, BNPL offer convenience and an ease of use that is second to none, creating a rare seamless experience in the financial world.

Afterpay is a platform that has been growing in presence though e-commerce channels and opens payment options for consumers. For example, Afterpay allows users to make big box purchases like a new MacBook without having to pay the entire cost upfront. They typically let users pay in four installments over a six-week period. User accounts are typically linked to a debit card or bank account, where payments are taken out automatically.[2] These BNPL arrangements normally make money from retailer partnerships and late fees, making it an attractive option for the responsible consumer.

And younger shoppers of today are increasingly credit card adverse, this is where BNPL comes in to address their concerns and offer up an attractive alternative financing option.

How Listening to Customers Make all the Difference

As with most evolutions, necessity breeds innovation and in some ways BNPL is no different. In the face of the global Covid-19 pandemic many consumers found themselves struggling and cash strapped, while at the same time optimistic about the future. Enter the buy now pay later model that is not new by any means but was made very accessible and easy for consumers to use.

What makes BNPL most appealing? Flexibility. One key macro trend, that is present across demographics and industries, is a strong desire for flexibility. Consumers increasingly want and expect products and services solely on their terms — how they want them and when they want them. And for better or worse, the term “credit” and credit cards themselves have a bad reputation, BNPL helps to address and combat that negative perception. BNPL offers up the ability to “chip away” at purchases without a credit review or application process resulting in a low-stress option that consumers crave.

Designing Solutions for Tomorrow, Starts with Customer Demands of Today

Innovation efforts of today demand agility and quick responses. The adage of “build, test, refine” has never been truer. To stay competitive, and relevant for that matter, brands must be quick to observe the market, and build their response to customer demands, and at the pace that consumers demand.

At empatiX we pride ourselves on bringing a human-centered approach to innovation by supporting agile programs that get to the heart of consumer demands and then designing and testing the right solutions round it. As options proliferate and technology evolves it has truly never been more important to stay connect to customers — and we can help you get there.

[1] “Buy Now, Pay Later: The “New” Payments Trend Generating $100 Billion In Sales.” Forbes. September 7, 2021. [2] “Why millennials and gen-Zs are jumping on the buy now, pay later trend.” CNBC. August 7, 2021.

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