‘Buy Now Pay Later’ Is Now a Trillion-Dollar Market

‘Buy now pay later’ is now a massive market. Massive as in trillions, not billions. For reference, the entire US GDP is about $25 trillion in one calendar year.

Every business opportunity with a large pot up for grabs attracts new entrants.

New buy-now-pay-later players are entering the industry to cash in on the booming trend.

It’s huge, and it’s spreading across all major continents. Here’s what’s been happening in the buy-now-sell-later market just recently:

  • Revolut, one of Europe’s largest virtual banks, has announced that it plans to enter the ‘buy now pay later’ market.
  • PayPal has paid $2.7 billion for the acquisition of Paidy, a Japanese ‘buy now pay later’ platform.
  • Goldman Sachs entered a deal to buy GreenSky, a ‘buy now, pay later’ firm that arranges loans for large one-time purchases such as cosmetic surgery and construction projects. The GreenSky acquisition is part of Goldman’s effort to do more consumer, main street banking.
  • Monzo, a major virtual bank, has announced plans to enter the BNPL market.
  • Scalapay, a major European player in the buy-now-pay-later market, has raised $155 million.
  • Australia & Africa: Zip, an Australian BNPL provider, has acquired Payflex, a South African counterpart.

Pay later and be proud

Bloomberg reported on a TikTok craze involving Klarna, another buy-now-pay-later company.

Younger consumers are increasingly using these platforms and they’re proud of it.

One reason is many younger shoppers don’t qualify for credit cards.

Buy-now-pay-later companies say they rely less on traditional credit scores and reports and in some cases don’t use them at all. Doing so allows them to approve more consumers.

Shoppers gain the ability to buy things even without cash on hand. This translates into higher sales for retailers.

Many market research firms, the buy-now-pay-later market to get up to the $1 trillion mark by 2026.

How can small entrepreneurs capitalize on this trend?

If you want to increase your conversion rates, adding a buy-now-pay-later option could be a good place to start.

Things become more affordable if they can be paid for over time rather than all at once.

If you sell on Amazon, this option should appear on your dashboard soon. If you use Shopify, you already have Shop Pay Installments.

What this means for you

If you’ve tried to sell more expensive items in the past and weren’t successful, now might be a good time to try again.

Paying in installments has never been easier for the average consumer than it is right now.

How do you pick a Buy-Now-Pay-Later (BNPL) provider?

In March 2021, 56 percent of Americans used a buy-now-pay-later service.

By comparison, in July 2020 that figure was 38 percent.

Yep, the BNPL market is growing that fast.

But not all BNPL providers are created equal

Some companies appeal to Gen Zs while others appeal to professionals and to older audiences that have more disposable income.

As a company, which one do you pick?

BrandTotal may be able to help you decide.

They have analyzed thousands of paid social media campaigns from three major BNPL providers:

  • Klarna,
  • Affirm
  • Afterpay

Here are some highlights from their analysis:

Klarna targets Gen Z

50 percent of Klarna ads were seen by people aged 18-24.

Affirm targets professional millennials

They spent a massive 64 percent of their budget on Twitter and LinkedIn, while only 11 percent was spent on Facebook and Instagram.

Afterpay is focusing on Facebook and older adults

Afterpay spent 53 percent of its ad budget on Facebook, and 78 percent of its target audience is over 35.

So maybe Klarna isn’t the best BNPL choice for selling expensive suits to professionals with high levels of professional income.

Similarly, if you sell expensive backpacks to TikTokers, they might not be that familiar with Afterpay.

So, on the general price spectrum: Afterpay ($$$) > Affirm ($$) > Klarna ($)

Will buy-now-pay-later end well?

Buy-now-pay-later means more consumer debt.

While debt helps stimulate demand, it’s a suppressant when it has to be paid back. You’re not only borrowing from a company, you’re borrowing from your future self.

Consumer debt – whether that’s housing, student loans, credit cards, autos, speculation on financial assets, etc. – can cause problems if allowed to get out of hand.

All companies in the buy-now-pay-later space need to remember what kind of business they’re getting into. It can be a dangerous one.

It also means consumer watchdogs and regulators are likely to become increasingly involved in the space.

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