Buy-Now-Pay-Later - Article Analysis

Buy-Now-Pay-Later on the Rise 

The Buy Now Pay Later industry is growing at a rapid pace. Amongst its users, there are many interesting trends surfacing from the popular technology which enables customers to break up payments interest-free over a number of instalments.

One of the biggest trends is the transfer of consumers from the use of credit cards to the use of BNPL services. One in four users cancelled their credit cards and about the same said they no longer use theirs. The most popular brand used is AfterPay, with 84% of BNPL users owning an account with the company.

These BNPL purchases are increasing the amount of online retail spend across the country which reflects Australia Post’s 2019 eCommerce Report findings, displaying the Australian online purchase industry to be growing at a rate of 24.4% YOY. Stronger distribution networks and growing trust with online service providers are driving this strong growth and as such businesses need to adapt their strategies to match these trends in order to meet increasing consumer expectations. 

Purchase categories varied although clothing dominated, as seen in the below figure. 

Where do BNPL users spend their cash? (%)

Of potential concern is the rise of missed repayments on BNPL purchases, an issue for 1 in 3 users. For example, almost 1 in 4 men aged 25-34 have reported missing multiple payments, whilst only half the number of females did the same. 

From a marketing standpoint, there are many interesting insights to gain from these figures. 60% of the purchases made on BNPL services are classified as “luxuries” like clothes, whereas only 17% were classified as “essentials” including food. This could suggest that BNPL service users make more irrational decisions when making online purchases and are willing to make more purchases when payments are broken-up. This represents an opportunity for businesses to expand their online offerings and benefit from the growing trend, but also highlights the need for ethical information about the implications of the use of the service. For example, 28% of users have come under financial strife as a result of using BNPL, and as a great percentage of these users happen to be in younger generations (only 55% of 18-24 year old males have never missed a payment vs 86% of 55-64 year olds), it makes sense for brands to highlight the potential dangers of using BNPL before engaging. Resulting, brands can enhance their customers’ lifetime value, but also attempt to foster a purchasing culture which doesn’t place customers under unnecessary financial stress. 

Furthermore, with recent RBA talks of sanctions to BNPL services in its 2020 review of payments regulations, the future success of the technology is still unclear. Despite this, AfterPay, the original and leading supplier of the technology defended its business model stating it generates thousands of leads for businesses using the service to hard to reach millennial and Gen-Z target markets, whilst advocating its ability to keep customers loyal, trustworthy and spending responsibly. Further, it shares data about its users with merchants to enable them to better understand and interact with them in order to provide higher quality services and products. 

Do you think the use of BNPL services is the future of retail spending, or is it simply a flashy new mechanism to add to Australia’s already colossal debt portfolio which encourages impulse buying at the expense of reaching long-term savings targets? 

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