The reality in recent years has changed the e-commerce market significantly. Customers much more often think twice before finalizing a purchase. Such a trend seems to be worldwide and people are simply more interested in paying in instalments or deferring payments for later. That’s the space where the deferred payments (BNPL) come to the rescue.
Deferred payments are becoming an important part of fintech and e-commerce nowadays. The largest players in the market invest in startups dealing with this sector. In return, e-commerce itself notes very positive effects of the implementation of BNPL.
Does this mean that they will replace traditional consumer loans and become the future of fintech?
The global share of deferred payments in e-commerce, according to the data of the WorldPay report, will gradually increase and, as a result, will double in 2024 and reach the level of 4.2%.
In Europe, this share is already 7.4% and, according to calculations, it will grow rapidly. It is indicated that in 2024 the value of e-commerce transactions will reach 20 billion USD.
The idea itself is simple:
· The customer buys online today and pays for purchased goods after some time.
· It depends on the specific offer. However, it is usually after a month or more.
· The core of the offer is that by using it, you do not incur any additional costs.
· The full amount is covered on the day of purchase and you pay it back a bit later.
· In addition, the payment can be postponed (usually for a small fee), broken down into smaller instalments, repaid from the credit card limit, etc.
It seems that BNPL is nothing new. For many years, stores have been offering purchases in instalments (also deferred with zero interest), and all banks offer credit cards, which also have the option of spreading the overdraft into convenient instalments.
· BNPL is a fully digital product.
· It does not require traditional cards or paper certificates.
· The service is available in a well-designed application.
· The use of this type of service does not require credit analysis, waiting for the card and its activation.
· It is a much cheaper way to finance purchases than a traditional bank or credit card.
Customers appreciate this solution, especially with sudden and unexpected purchases. What’s more, a large group of customers uses deferred payments in order to be able to test the product first, and then possibly pay for it later.
Deferred payments are a beneficial solution not only for customers but also for e-commerce owners.
36% of entrepreneurs declare that having instalment payments in their offer is an important area of investment. The study by Twisto shows that the introduction of the buy now and pay later option brought a number of positive effects to online stores, such as:
· Increase in the average value of the shopping cart (79%)
· Increase in revenues from online sales (76%)
· New customer groups (75%)
· Higher sales conversion (75%)
The Entrepreneurs, thanks to the implementation of deferred payments, declare that they have achieved much higher profits from the sale.
The customers that use deferred payments the most are mainly consumers of the Z generation (21-25 y.o.) and Millennials (26-40 y.o.). The percentage of Gen Z in the US using BNPL increased sixfold from 6% in 2019 to 36% in 2021. By contrast, the use of this type of payment by millennials has more than doubled from 2019 to 41%. The execution of transactions deferred in time has also more than tripled among the X generation (41–55). There is also a noticeable trend among Baby Boomers (56-75).
Deferred payments are becoming a shiny star in today’s e-commerce by their simplicity, intuitiveness, convenience and accessibility.
Moreover, experts predict that a chance for the development of deferred payments is the wider opening of marketplaces to them. Purchasing platforms are responsible for a large piece of the e-commerce cake. Analysts emphasize that offering such a form of payment directly on the product page or in stationary markets could initiate a big boom in BNPL services in the nearest future.