![]() ![]() This likely led to some consumers using BNPL programs.ĭetractors’ warnings won’t slow the growth of BNPL any more than their warnings against the dangers of using credit cards have had on the growth of that product. More than half of BNPL users had their credit card limits decreased in 2020.Two-thirds of them, however, said it was because they lost track of when the bill was due-just a third blamed it on not having the money to pay the bill. Over the past two years, 43% of BNPL users made late payments.Other warning signs support the critics’ claims: In contrast, of consumers who don’t use BNPL services, just 20% rate their financial health as dire or struggling. Among BNPL users, 31% consider their financial health to be “dire” or “struggling” (versus “managing” and “thriving”). “There is a risk that BNPL schemes may attract people who are already in financial difficulties and may be struggling to make their existing bills and payments.” Consumer advocates criticize BNPL programs for encouraging consumers to take on debt they might not be able to afford: The Downside of Buy Now Pay Later?īNPL has its detractors, however. To maximize the value of buy now, pay later, it must be integrated with the other elements of the marketing mix-that is, become the 5th P of marketing. Why? Because a BNPL offering-by itself-is only part of the value chain (or customer journey). This is not to say that with their lofty valuations, some BNPL providers-Klarna is a good example-won’t be acquirers themselves. If it’s positive, they’ll acquire Affirm or build their own BNPL capability. The giant retailer is partnering with Affirm-instead of acquiring the company-in order to test the impact that BNPL can have on sales. Other BNPL providers will have to find similar paths in order to keep up with the margin improvements Afterpay will realize. Expect Afterpay’s app to be embedded into and absorbed by the Square app after the acquisition is complete.Īs Afterpay gets absorbed into Square, its payments will increasingly come from within the Square network, not the traditional payment rails. Why does Square need Afterpay’s app to enable merchants to advertise when it has broader reach than Afterpay does? Answer: It doesn’t. Standalone BNPL Providers Won’t Last Long This is already happening with BNPL specialists like LoanStar Technologies in home improvement and Prima Health Credit in elective medical procedures. Few (if any) will be able to do that in more than just a couple of product categories resulting in specialization by product category. BNPL providers will need to be masters of the customer journey. Today’s merchants will demand accurate attribution statistics. Sound familiar? Visa and MasterCard made the same claims about credit cards they were launched. ![]() BNPL providers claim that they help merchants make sales that wouldn’t have been made otherwise. ![]()
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