Buy products now and pay for them later. This concept is not new. In fact it’s well known from the time catalogues were on the rise. Consumers ordered several items of clothing that they liked but only paid for the ones they kept. The rest was returned. The difference between then and now is that providers can now check customers’ creditworthiness more quickly, easily and digitally, and the choice of payment methods has expanded thanks to a large number of BNPL providers and their technology.
The buy now, pay later market is growing steadily. According to a study by Juniper Research, the BNPL market will quadruple in the next five years and will become a trillion-dollar market. A large number of consumers value the choice of paying methods both in-store and online, and are opting more often for buy now, pay later. But who exactly are the users of buy now, pay later options?
More than 70% of consumers use buy now, pay later offers while shopping
The flexibility that buy now, pay later provides is particularly appealing to younger consumers. Credi2 surveyed 1,000 Austrians and Germans for the study “Consumer Behaviour Rethought”. For the majority i.e. 70% of all respondents, financing solutions are used when shopping, especially among 18 – 34 year olds. Financial flexibility is the most important aspect of the wide range of financing models. With BNPL they are more open to buy something spontaneously and reach for higher-priced products. It is interesting to note that for 60% of consumers it doesn’t matter who provides the buy now, pay later loan. Every third person thinks that the conditions are even more favorable with retailers than with their principal bank.
Speed and flexibility: the make-or-break aspect
Why are buy now, pay later services so attractive to customers?
For BNPL to work, the loan application process must be straightforward. The experience of Daniel Strieder, CEO of Credi2, confirms that today’s consumers are hardly willing to submit lengthy applications to their principal bank. A quick and easy process within a few minutes, smoothly integrated into the purchasing process, is a must. Individually adjustable rates offer consumers the desired flexibility.
Many international fintechs such as Klarna or Paypal have recognized the possibilities of buy now, pay later models and have been pushing strongly into the market. While traditional banks have the competitive advantage of a strong brand, they could still end up losing retail customers unless they enter into the BNPL market. It’s important to remember that in order to strengthen customer loyalty and improve the customer journey, banks need to look into innovative payment methods.
By working with Credi2, banks can launch their own BNPL solution within just a few weeks and enter the booming market as an important player.