More Americans Than Ever Will Use ‘Buy Now, Pay Later’ Plans For Holiday Purchases

More Americans than ever are using “Buy Now, Pay Later” plans to buy holiday gifts.

Buy Now, Pay Later — a short-term financing option that lets consumers make purchases and pay at a future date, often interest-free — is increasing rapidly in popularity. Typically offering their services at checkout, BNPL companies like Klarna, Afterpay, and Affirm have diverted between $8 billion and $10 billion in annual revenue away from banks. 

Americans plan to use BNPL heavily over the holiday season. According to a survey from Cardify:

Nearly half (45.1%) of users said they will be paying for part — or all — of this year’s holiday purchases using BNPL. When asked to share the full list of payment methods they’ll be using, BNPL came in third place behind debit (65.7%) and credit cards (54.6%). Consumers would rather pay for holiday purchases using BNPL than cash (31.5%). Among those who plan to use BNPL this holiday season (“Holiday BNPL Shoppers”), 46.6% will use BNPL for more than half (37.8%) or even all (8.6%) of their holiday purchases.

Data also suggests that users are increasingly comfortable with the service, as 51.1% of Holiday BNPL Shoppers plan to use BNPL for more of their shopping this holiday season than they did last holiday season. While 38.9% plan to use it the same amount, only a minority (10.1%) plan to use it less. If BNPL was not an option this holiday season, those who planned to use it said they’d resort to a debit card (51.6%), credit card (49.9%), or be forced to spend less (45.8%).

“It’s become more mainstream,” explained Cardify CEO Derrick Fung as reported by CNBC. “The consumer over the last 12 months has become more compulsive and BNPL products are the result of us being locked up for too long and wanting more instant gratification.”

However, consumers often overestimate their ability to make BNPL payments. Citing a survey from Oxygen, CNBC added that 56% of shoppers have made a purchase with BNPL that they could not pay off.

Retail purchases made via BNPL will near $100 billion in 2021 — up from $24 billion in 2020 and $20 billion in 2019. According to Forbes, Big Tech companies are snapping up opportunities in the new industry:

Amazon and Affirm partnered. Amazon shoppers will be able to split purchases of $50 or more into smaller, monthly installments. Affirm said some loans will come with 0% APR, while others will bear interest.PayPal will stop charging late fees on BNPL payments. Since its launch, more than 7 million consumers have used PayPal’s BNPL service, purchasing more than $3.5 billion of products.Square acquired AfterPay. The deal will bring AfterPay’s merchant relationships into Square’s seller ecosystem and help to convert AfterPay’s existing customer base into Cash App users.Apple announced a BNPL offering. Apple Pay users will be able to make interest-free BNPL purchases, choose any credit card to make the payments, and avoid late and processing fees with certain plans.

Beyond BNPL, Americans have been eager to receive short-term cash infusions in the form of government stimulus checks. A survey from Quinnipiac University in January found that 78% of Americans — including 90% of Democrats and 64% of Republicans — approved of the $1,400 checks supported by President Biden.

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