Our daily lives are comprised of countless purchases, big and small. Beyond the advancements in the products and services we buy, there has also been rapid change in how we pay for them.
A transition to a cashless society has been in motion for decades now as digital wallets gained traction worldwide. But today this also includes alternative methods of financing purchases, such as Buy Now Pay Later (BNPL) services.
According to a survey by the Ascent, in March 2021 approximately 55.8% of U.S. consumers has used a BNPL service. This is significantly higher among younger consumers, with Gen Z penetration reaching over 61% in 2021.
When comparing the data to survey results from June 2020, the growth in the space has been strong. Overall, adoption rates were around 37.7% in 2020 for BNPL services.
Additionally, although credit cards remain a competitive alternative and the status quo, consumers have largely flocked to BNPL services because of a variety of issues with credit cards.
When looking into why consumers use BNPL services, 37% cite not having to pay credit card interest as the key reason, 19% say they don’t like to use credit cards, and 14% say they can’t get approved for credit cards.
Today, the story includes not only leading names like Affirm and Klarna – companies like Square operate Cash App Borrow enabling users to borrow small amounts, while PayPal is offering similar services as well.
Going forward, it will be interesting to see the variety of companies that come to life in the ecosystem, and which become widely adopted by consumers.
The author or his firm may have positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.