This service does what it promises. It enables consumers to purchase a product and pay for it in interest-free installments, all without the need for a credit card. The process mainly concerns online orders, but there are solutions that also support the use of interest-free installments in stores. BNPL (Buy Now Pay Later) services have won audiences in many countries around the world. In June 2022, we saw Apple at its Developer Conference WWDC 2022, presenting its own Buy Now Pay Later service that will be connected to the Apple Card and the company’s entire payment system and will probably be available during the Fall.
How BNPL became the new consumer trend in luxury brands for the young generation
BNPL is a relatively new payment method that has become popular in recent years. The concept is similar to traditional credit card installments, but what differentiates BNPL is the non-requirement of a credit check. This appears to be a boon for the massive Gen-Z and millennials who may not be paying for a traditional credit card, but still don’t aspire to consume luxury products. Currently, payment providers such as Klarna, Afterpay, and Affirm are some of the most common services that both brands and analytics are looking for.
For luxury brands aiming to penetrate the youth market, BNPL is the ideal solution. Using the BNPL system allows consumers to spread the cost of their purchase over several installments, which can range from three to six months, depending on the provider. This allows younger buyers with less disposable income to finance their purchases in installments and be in a better position of controlling their money.
With more spending power, young people around the world are becoming more willing to spend their money. While mature economies in the West see some increased consumption from younger ages, the bulk actually comes from the East, especially in the Asia-Pacific and Southeast Asia regions. The fact that the young population is fintech-savvy and it has a growing income due to strong economic growth and low unemployment, makes the perfect recipe for success for both service providers and luxury brands.
Enabling Access To Luxury Brands
Recognizing the youth as a market not to be missed, BNPL providers have partnered with a number of luxury brands such as Gucci, Balenciaga, Bvlgari, Givenchy, Bottega Veneta, and others. Luxury retailers such as Saks Fifth Avenue and Neiman Marcus have also embraced the service. The challenge for them is to expand their customer base by attracting those who were previously unable to easily purchase luxury products. Despite the fact that the majority of BNPL users belong to Gen-Z or millennials, there is also a group that is not in this age group and is financially able to afford the high price of a luxury product. Still, they choose to use the service because they find it more convenient.
Is BNPL the next big thing for online and physical branch purchases?
All BNPL services use the data they already have to create a profile and ultimately rate a user before offering them the service of interest-free installments. On the one hand, consumers prefer them, while for merchants they are a thorn in the side as many customers seem never to receive their orders, and the e-shops pay extra money fees for shipping by courier best afterpay companies.
On the other hand, BNPL services (such as Capital one buy now pay later) may motivate some users to prefer this payment method instead of cash on delivery. But certainly, BNPL services may motivate some users to prefer this payment method instead of cash on delivery. At the end of the day, BNPL services help consumers while stores give more ways for users to complete and pay for their orders.
The take-off of Klarna best buy and other buy-now, best afterpay companies in recent months is partly due to measures to tackle the pandemic that has led to the closure of brick-and-mortar stores and the rise of e-commerce.
It is typical that the sector recorded amounts of venture capital financing – a record. By 2025, buy-now, pay-later volumes in Europe are forecast to reach $357 billion, accounting for nearly half of the global estimate and 30% of total estimated e-commerce spending, according to research by Kaleido Intelligence. Europe as a market will take up to 50% of purchases to ‘buy-now, pay-later services in the coming years, with the vast majority of customers under the age of 35.
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