BNPL use hit a high highlight of Cyber on Monday 2024 and recorded a $ 991.2 million consumption (an increase of 5.5% over the year) according to Adobe Analytics data. The trend is in line with Splitit and Pymnt’s research last November, which found two-thirds of consumers plan to use BNPL payment options for this holiday season (with 38%intended to use it to spend on themselves) .
This provides a huge opportunity for merchants, especially those IE trading, as BNPL is primarily used for online shopping. However, industrial experts warn that although BNPL offers flexibility for budgetary consumers, it bears financial risk, especially for those most dependent on BNPL services.
Let’s explore the effect of BNPL below. Learn why consumers increasingly prefer this payment option that consumers are more likely to use it and where BNPL expenses happen. I also discuss what challenges and opportunities will be for the retail industry.
The increase in BNPL in holiday expenses
BNPL has gained momentum since 2021 when it recorded an increase of 102.3% in BNPL users from previous years. By 2026, forecasts show that almost 40% of US Internet users will use a BNPL solution, which further emphasizes how the payment method is further edge into mainstream.
During the holiday season, the increase in purchases can now later be attributed to consumers who want greater flexibility for their shopping in light of persistent inflation and credit cards higher than ever. Adobe Analytics expected US shoppers to carry more debts strong to rely on buying now paying later holiday offers from retailers, increasing the use by 11.4% the previous holiday season.
Buyers say that their main reasons for using BNPL are to free up cash (22%) and to buy something they couldn’t afford otherwise (19%). BNPL services allow shoppers to expand the purchase forces by allowing them to pay for their purchases in monthly installments (3, 6, 9 and 12 months) usually with zero to minimal interest rate.
The effect of purchases now pays later holidays on the retail industry
Retailers should be aware of the subsequent increase in BNPL preferences for holiday expenses; A study shows that those who have increasingly adopted BNPL have proven that they can convert more window connectors and encourage customers to check out with fuller wagons.
How does BNPL work during the holidays?
Knowing that wages later options are available in Merchant’s large, drives higher expenses, as more than one in four shoppers who use the financing option before checking tend to buy more per. Pymnts.
The same study clearly shows that 30% of consumers say they use BNPL more strongly during the holiday season than the rest of the year. And 43% of holiday buyers (60 million US consumers) are heavily influenced by BNPL holiday offers when choosing merchants.
When it comes to consumers’ dependence on BNPL options for their holiday expenses, the same study revealed the following:
- Almost one in five expected to spend more than 60% of their total holiday expenses for wages later methods.
- The average purchase now pays for the consumer’s estimates for holiday shopping that 36% of their holiday purchases would be financed by BNPL settings.
- About half of all holiday buyers expected to go to BNPL financing between 20% and 60% of their purchases.
- Only 6.4% of holiday buyers expected to finance almost all of their purchases with pay later opportunities.
- Only 5.4% did not plan to finance holiday expenses.
- Consumers probably used BNPL for larger expenses, according to a ZIP holiday expenses.
The time of the offer also means something. Most shoppers (62%) prefer to know if a salary is offered later solution before deciding what to buy, rather than after making the purchase. Ninety percent of respondents who do not use this financing option would be more likely to use them if offered during the purchase journey. Early promotion of Lønn’s later plans in the shopping journey is useful for attracting new customers.
Who is using BNPL during the holidays? BNPL use cases
Data shows that people across all age groups are more likely and open to using wages later opportunities for their holiday expenses. The same Pymnt study revealed which demographics are more likely to take advantage of purchases that now pay later holiday shopping options to give gifts to others and themselves:
- Parents tend to take advantage of Lønn’s later opportunities for holiday expenses. Seven -seven percentage, or two out of three parents, wages later considered solutions for their holiday purchases.
- Two out of five millennia were very likely to use Lønn’s later plans for holiday hopping, while 34% of Gen Z intended to use salary later options directly.
- An interesting thing to note is that 6.5% of shoppers who had not yet used Lønn’s later plans expected to do so during the holiday season, with an additional 17% considering it.
Knowing what age groups are likely to be swayed or lured to use (and spend more) due to holiday money later options fuel for customer purchases, drives retention and increases holiday sales. It also reveals that the majority is interested in funding some, but not all, their holiday purchases through BNPL.
Take advantage of the convenience and financial flexibility that they pay later solutions offer to convert indefinite customers and those who want to maximize gift during the season.
Are there any risks associated with BNPL?
Even when holiday shopping is easier and more economically flexible with BNPL, it comes with risks. More than half (56%) of BNPL users say they have encountered at least one problem, according to a banking survey.
Overrun (29%), lacks a payment (18%) and difficulties in returning goods or getting a refund (18%) is among the biggest problems that users have experienced. A smaller number of users also said they lamented a purchase (17%) or felt unhappy with at least one purchase (17%).
Consumers perceive BNPL solutions as a better (and safer) alternative to credit cards. Increasing interest rate card speeds are one of the reasons that consumers prefer to take advantage of BNPL offers instead of pushing their cards. The average annual interest rate on a credit card rose to a record height of 20.79% in August 2024 and remained an increased 20.42% from November, according to Bank Rate.
However, industrial experts warn that consumers can quickly become overlooked financially, fail to make payments, land in debt collectors and destroy their credit. BNPL services were loosely regulated until the Consumer Financial Protection Bureau issued a rule in May that classifies BNPL loans as credit card providers. This gives consumers additional rights and legal protection as the right to contest charges and demand a refund after returning.
New York Fed’s monthly study of consumer expectations asking consumers to estimate the likelihood of becoming a borrower in the next three months was 13.6% in August. This is the highest since the spine at the start of the Covid-19 pandemic. The figure is even higher (19.5%) for those with annual incomes below $ 50,000.
There is a lot to look at how BNPL payment collections will do after the holiday season, but the strong use of pay later options in Cyber Weekend indicates consumers stretched their budgets by choosing BNPL for gift during the season.
Frequently asked questions (frequently asked questions)
Which BNPL providers are popular for holiday shopping?
The largest BNPL providers are afficre, afterpay and Klarna.
Can BNPL affect my credit score?
Yes, it can. Some BNPL services require control of hard credit while others perform soft queries. If a provider reports activity to credit agencies, it can affect your credit score.
Are there hidden fees with BNPL services?
There are fees for BNPL users who do not make payments on time, such as late fees, cover fees and interest payments. There are no fees involved for those who can pay monthly payment installations in full and on time.