BNPL Faces Mainstream Adoption, Mainstream Challenges

A new report from Checkout.com shows just how deeply rooted buy now, pay later has become among consumers. And not just in the U.S. but globally.

The Checkout.com report was aimed at SMBs and is clearly designed to convince them that offering a BNPL option has become table stakes.

And while we agree that’s generally true, Checkout.com isn’t a disinterested party here. Last April, for example, Checkout.com led a $110 million funding round in the Saudi BNPL platform Tamara.

And as BNPL grows, it is becoming more controversial. Articles are popping up every day raising alarm bells about rising consumer debt tied to BNPL, particularly among the younger consumers that have disproportionately embraced the model.

But there seems to be no sign that merchants are tapping the breaks on BNPL. They don’t want to lose a sale to a rival that offers BNPL. And, notably, the platforms are accepting all the default risk, in exchange for a fee per transaction.

Let’s look at what Checkout.com’s new BNPL report reveals.

Widespread Adoption

BNPL is penetrating all markets. And with all demographic groups, even if the model is more popular among Millennials and GenZs.

According to Checkout.com, UK Millennials and 50% of GenZ’s in the UK have used BNPL. But there are significant minorities using it in other demos. Even 12% of the “silent generation” — those born in the Depression, have used BNPL.

In the United States, 45 million people already use BNPL. And three-quarters of these are
are Millennials or younger.

“BNPL is particularly appealing to a younger audience because of generally lower wages in this age group,” the Checkout.com report says. “They, therefore, benefit from the spread-out payment options. The convenience and 0% interest rate on repayments are also appealing.”

What the report doesn’t say is that BNPL leads to larger average order values. This seems by definition to mean that BNPL also leads to less responsible spending decisions. Perhaps not in every case, but often enough.

In fact, a recent SF Gate article detailed how BNPL has become engrained in younger consumers’ habits. And to a degree that is raising an increasing alarm. This is from the May 5 article by Joshua Bote.

Do a quick scan of TikTok and you’ll find trendy young people casually blowing hundreds or thousands of dollars on clothes and jewelry, often set to the clattering, bass-boosted din of Florida rapper Saucy Santana’s fittingly titled “Material Girl.” Plenty of those influencers get the goods they flaunt for free. But if you don’t have the followers, or the up-front cash to blow, TikTokers have a tip: Just use “buy now, pay later” services, the hottest new way to take on debt.

It’s easy to see how this is a recipe for disaster, in particular as recession clouds are appearing on the horizon. And, not to mention, the reckoning taking place right now in the public markets, which is making the easy cash that has been fueling startups a lot less easy to come by. Widespread layoffs are starting to happen and will get worse before they get better. No doubt many of these GenZ’s are relying on these jobs. At least in places like San Francisco.

Perhaps things won’t unravel the way some are fearing. But if they do, the BNPL bubble will be one of many to burst.

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