5 Facts About The Impact Of BNPL On Ecommerce
August 28, 2021
The recent announcement that buy now pay later (BNPL) start-up Affirm would be moving ahead with its IPO sent insiders buzzing about the future of BNPL and the impact of this fast-growing payment method on ecommerce. With worldwide ecommerce sales topping $4 trillion in 2020, and 18% of all retail sales taking place online, according to eMarketer, the reliance by consumers on seamless BNPL solutions is likely to increase. CBInsights reported that BNPL is “projected to triple its market share in North America by 2023.” Below are five facts about the impact of BNPL on ecommerce.
1. Online Shoppers Appreciate BNPL Options That Make Buying Easy
CBInsights reports that “A major contributor to Affirm’s momentum has been the rapid acceleration of online commerce.” Like all BNPL payment options, including Klarna and Afterpay, Affirm facilitates a quick and easy transaction for consumers. And, for Affirm, this is most apparent in its partnership with Peloton, where 30% of Affirm’s sales are “currently concentrated.”
2. BNPL Options Boost Ecommerce Conversion Rates, Cart Totals & LTV
Both Affirm and Klarna boast of offering conversion benefits to merchants. On its website Affirm asserts that merchants see:
- Up to an 85% lift in average order value (AOV)
- +20% repeat purchase rate
- Increased customer conversion
Klarna offers similar boosts to merchants, including:
- 41% increase in AOV
- 30% increase in conversions
3. Some Shoppers Exclusively Prefer BNPL Payments, Many Spend More When BNPL Is Available
According to MarketingWeek, a “Thisismoney.co.uk survey found nearly one in five consumers say that they wouldn’t shop with a retailer who didn’t offer some sort of BNPL scheme.” Klarna discovered that 44% of shoppers would have ditched their cart if a four-payment BNPL option, like Klarna offers, wasn’t available. (See image)
Additionally, a survey of 6,500 adults by Cardify.ai, a data firm that tracks consumer spending, found that 44% of those surveyed said the use of BNPL was “somewhat or very important” to how much they planned to spend during the holiday season, and “48% said buy now, pay later will allow them to spend at least 10% to 20% more than they would using a credit card.”
4. BNPL Is Popular With Millennials And People Who Are “Underbanked”
Millennials are the group most likely to use BNPL, and they are also a group known for being “underbanked,” meaning they prefer alternative payment methods versus relying on credit cards or traditional banking. Many Millennials have delayed making big purchases like houses and cars, carry more debt than other generations and are distrustful of banks and credit card companies. These financial characteristics have led many Millennials, and other underbanked populations, to choose BNPL payments. “BNPL options are especially appealing among Millennial consumers, and 27.3% of Millennials tap installment payment plans to make purchases, reported PYMNTS.
5. As BNPL Grows In Popularity, Credit Card Companies Are Offering Their Own Point-Of-Sale BNPL Options
Credit card companies are feeling the heat from BNPL payments, and they are responding by coming up with their own BNPL point-of-sale solutions. CBInsights notes, “Credit cards dominate the [ecommerce] market today, with nearly $1T in outstanding balances in the U.S. But BNPL is the fastest-growing ecommerce payment method.”
In response to the growth of BNPL, booming ecommerce sales and preferences for one-touch shopping, Visa and Mastercard have plans to work with payment processors to facilitate installment payments. Similarly, American Express introduced “Plan It,” a monthly payment plan for purchases of $100 or more. “We know that a little flexibility can go a long way, and sometimes people need more time to pay off purchases, especially around the holidays,” said Shikha Narula, vice president of U.S. consumer lending at American Express.
BNPL And Ecommerce Will Continue To Work Together
It’s becoming increasingly evident that many of the habits consumers adopted during 2020 are going to stick around in 2021, including shopping online more frequently and preferring seamless transactions. Ecommerce sites offering easy transactions, simplified payment options and well-communicated delivery are likely to benefit from higher conversion rates, higher cart volumes and repeat business.
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