The retail industry has seen rapid changes in the past few years, with the migration from in-store to online supercharged by Covid. The wheels were already in motion, however, and one of the outcomes of this shift to online shopping is how people pay for products and services. Over the years, a number of alternative payment methods have come to the fore, with buy now, pay later (BNPL) leading the charge. It has quickly become an important way for consumers to buy items. But just in case you’re still sitting on the fence, we’ve put together some of the most impressive facts that you need to know about BNPL.
A global market share on the rise
BNPL accounts for 2.1% of the global market payment share. It’s impressive when you consider that BNPL is a new payment concept compared to legacy payments like debit and credit cards. By 2025, it’s expected to grow even further, between 10% to 15%, showing just how important it has become for consumers as a payment method. The numbers are even more impressive in the UK: it’s set to grow by 34% in 2023.
It continues to grow in value
Since Covid, the number of BNPL providers has increased as it quickly becomes the primary payment choice for many shoppers. According to CNBC, BNPL is already a $100 billion dollar global industry, and by 2025, ecommerce transactions will reach $680 billion.
The UK is becoming a crucial BNPL market
More than 35% of the UK population already use or would consider using BNPL during their daily lives, according to Forbes. Its market share in the UK is around 5% and the high demand is spurring sustained growth. These numbers further underline just what an important payment method it’s becoming in the UK and the crucial role it will play in enabling customers to buy the products they love.
BNPL is driving a generational shift
Much has been made of BNPL being the popular choice with millennials and Generation Z, and this is very much the case: 30% and 36% of BNPL users are millennials and Generation Z respectively In the UK, 49% of online shoppers aged 25-34 years old reported using BNPL compared to 51% of said they use credit cards. For Generation Z, the ratio between BNPL and credit cards is even more impressive, with 42% saying they use the former and only 31% using the latter. This points to a generation shift towards newer and smarter payment methods, with millennials and Gen Z the early adopters.
It’s not just for millennials
BNPL isn’t solely used by demographics made up of millennials and Generation Z. It will also be an essential payment method for many generations by 2025, with baby boomers accounting for just under 15% of BNPL users while Gen X will make up 30% of the market share.
BNPL can save money
According to a Bain and Co survey, BNPL saved consumers in the UK £103 million in credit card interest costs. This is because BNPL tends to be interest-free, allowing shoppers to spread the cost over four payments without incurring additional charges. It has been billed as a fairer way to pay with credit and can be a more financially responsible method for customers to purchase goods and services.
Merchants see more growth
The same Bain and Co survey reveals the positive effect BNPL has on merchants. Of those surveyed, 76% said that it would be a key part of their growth plan over the next year. BNPL offers an insight into future payments, depicting a world where customers have seamless access to other payment forms and a genuine alternative to credit and debit cards. Many merchants have realised its strengths and are partnering with providers like Deko to offer their customer base more choice for how they pay. BNPL is a key ingredient in merchants’ growth plans.
Cart abandonment is still a problem for merchants
Cart abandonment sits at around 73% for computers, 70% for tablets, and 83% for mobile in the UK. The most important stage of the buyer journey still causes merchants headaches as too many shoppers fall off before completing a transaction. With its flexible and interest-free payments, BNPL is seen as one of the primary solutions to cart abandonment. It removes the strain around paying, relieving major pain points for consumers in the process. BNPL products like Pay in 4, offered by Deko, are designed to lower cart abandonment and recover lost sales, leading to an increase in order value of up to 70%.
Merchants see impressive results
BNPL is already helping to reduce cart abandonment, with 57% of merchants reporting an increase in basket conversion. On top of that, 46% said they had seen a rise in average order value. Compared to card payments, orders through BNPL can be 20% to 30% larger. The ability to spread payments interest-free empowers customers to make larger purchases and shop with more convenience.
Win now, and later
For merchants, these BNPL stats paint an impressive picture. Payments have shapeshifted, and it’s easy to see why 20,000-plus merchants in the UK already offer alternative payments methods to their customers. As more innovation comes to the market, BNPL will only evolve and offer smarter payment solutions for merchants and customers. You can get ahead of the curve and be leaders in the alternative payment space, increasing basket sizes and driving higher revenue streams in the process.