Customers more likely to shop, spend big, at shops offering Buy Now Pay Later

A recent report from Power Retail shows that customers are more likely to make a purchase - and more likely to buy big - at online stores offering Buy Now Pay Later payment options.

Findings from Power Retail’s Trajectory Report #50 reveal that 74% of those surveyed said they were more likely to make a purchase at a website with BNPL offerings. Buy Now Pay Later options also impact intent to spend, with 66% of customers surveyed saying they would spend more on a website with Afterpay, Zip Pay, or another BNPL option available.

These results don’t necessarily pair with a major leap in the use of Buy Now Pay Later services, though growth has been steady. The proportion of customers who said they had purchased something with a BNPL provider in the last six months was 47%. This is up 10% on the result from 2020.

Why are BNPL services driving more business?

It makes sense that people are willing to spend more when they see BNPL available, with the promise of being able to split up a large cost into smaller payments.

What’s more interesting is the fact that simply offering Buy Now Pay Later as an option makes online customers more likely to spend - whether or not they end up choosing BNPL at the checkout.

Some of this is possibly due to the psychological component of knowing the option for BNPL is an option. Even if you’re going to end up clicking through with your credit card, having the possibility of putting an amount through to a Buy Now Pay Later account can make things seem more accessible.

Concerns around data security may also be a driver. The same report shows that PayPal is consistently the most popular payment method (not to mention their newer Pay in 4 service, which is rapidly growing). The ability to keep personal banking data protected is a huge drawcard for BNPL services in the same way, preventing an online store from having direct access to your data.

Getting caught out by Buy Now Pay Later traps

With growing uptake of Buy Now Pay Later, we’ve also seen growing numbers of people experience the less-than rosy parts of the service.

Recent calls to regulate the BNPL industry have seen awareness growing around the realities of the service, which can be a major convenience, but can also eat away at your credit score and result in major late fees.

The number of surveyed customers who said that they had paid a late fee for one of their BNPL purchases doubled from 2020, going from 7% to 14%. That’s a significant increase, which makes sense with people putting more and more expenses on to their BNPL accounts. 

The majority of shoppers (58%) said they were happy to keep their BNPL spend at the same level, with 30% looking to decrease their spend on Buy Now Pay Later. Rather than citing fees or debt, the largest reason given for wanting to cut down was the need to reduce overall spending - a reflection on larger economic issues and a high cost of living. 

Buy Now Pay Later is an attractive option, with its ease of access and widespread availability, but it’s not your only option. It’s important to be aware of the potential traps that can come along with overspending on BNPL, and whether you might be better suited to a low rate credit card or personal loan - or holding off and stashing that money in savings!

Get educated on the impact BNPL can have on your future borrowing power. To learn more, find our rundown of the best of Buy Now Pay Later.