Consumer Survey Reveals Buy Now, Pay Later is Serving as Introduction to Luxury

As the shift to online shopping has escalated, so has consumer interest in flexible payment options like buy now, pay later. And at the same time, the technology offering has often encouraged higher spending per transaction.

According to a new study by Cardify.ai, the consumer spending data firm, more than 49 percent of people are spending more when using a BNPL service than they would spend on a credit card. In fact, the service may also be using it to spend on “luxuries they otherwise might not purchase,” Derrick Fung, chief executive officer of Drop, a subsidiary of Cardify.ai, told WWD. “From our research on BNPL we are seeing [that] BNPL is a matter of choice, not desperation. We see BNPL growth is coming from higher income groups and 75 percent of customers choosing to use BNPL for payment have the funds to cover the full cost.”

Moreover, the company’s survey found 55 percent of consumers used BNPL 1-2 times in 2020, while nearly a quarter said they had used it 3-5 times, 12 percent said they had used it 6-10 times, and 10 percent said they use it constantly.

At the same time, when asked what they are buying with the payment method that they might not otherwise purchase, 34 percent of all consumers said they are using the payment method to purchase “needs,” while 66 percent said they use it for “wants,” like jewelry or vacations.

“Our data suggests that growth is coming from higher income groups and used to by luxury items you otherwise would not purchase,” Fung said. “It’s seemingly not a tool for debt constrained consumer but rather a flexible, sustainable payment method that may encourage consumers to take the plunge on that aspirational purchase. [Retailers should] surface that BNPL is an option for payment early in the shopping journey, as it might be what pushes them over on that item they have been eyeing. Our data suggest that BNPL is a way to buy little luxuries versus everyday needs.”

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