Deferred payment, or BNPL (Buy Now, Pay Later), is booming. In an uncertain global economic climate, with households weighing up every purchase, this alternative payment method is proving very popular, and is making fintechs specializing in the sector very happy.
Deferred payment: the growth of specialist fintechs
Many fintechs have made the BNPL sector their specialty. These include Sezzle, AfterPay, Splitit, Affirm and Klarna, all of which saw significant growth in 2018 and 2019. Over the same two years, there was a 162% increase in deferred payment app downloads.
In Australia, market leader AfterPay is so successful that 8% of retail transactions nationwide went through it in 2019. Fintech Klarna is enjoying similar success, as it details in its 2019 business report. It has 11 million monthly active users, and the number of new downloads of its app has risen to 37,000 a day. In the US, the number of monthly active users quadrupled in the second half of 2019.
The success of alternative payment in times of crisis
The crisis of 2008 had already enabled deferred payment to develop, with Generation X and Generation Y consumers being the biggest fans. For the younger generation, generally opposed to credit and accustomed to making online and smartphone purchases, the BNPL payment method is a way of controlling one's budget while allowing oneself to make necessary purchases.
Although most consumers still prefer to pay by credit card, the increased purchasing power of the younger generation entering the job market could change all that. Especially as fintechs in the BNPL sector are multiplying their attractive offers, with 0% interest rates andno late fees.
As for e-commerce professionals, although BNPL platforms generally cost more, they are also more attractive to customers and offer a better conversion rate. What's more, the average order value is also higher with deferred payment solutions. In addition, the health crisis and the weeks of confinement have boosted online purchases.
Consumers' attraction to deferred payment is set to continue in the years to come, making the BNPL sector's Fintech sector the envy of the world.