Use of digital shopping platforms is driving “buy now, pay later” (BNPL) growth as more consumers embrace the convenience and speed of e-commerce, combined with the ability to buy. items they could not otherwise afford via smaller on-time installment payments.
It may be inevitable that these two forces shaping commerce in the era of the pandemic will go beyond the low-cost purchases that started the trend towards more expensive goods.
PYMNTS researchers looked at this trend in two recently published studies showing that consumers and merchants are using digital and BNPL purchases almost in unison, with a large and growing number using the combination to enter higher-priced territory.
The upcoming BNPL Horizon report: Expanding Access To High-Value Services, a collaboration of Amazon Web Services (AWS), found that 43% of American adults – roughly 111 million consumers – want to use BNPL to fund things, home renovation to medical treatment.
The AWS study notes that 41% of consumers interested in using BNPL for large purchases consider alternative credit to be less burdensome than personal loans. Some 26% prefer BNPL options “to avoid having their lines of credit blocked for expensive purchases”.
However, the analysis reveals that consumers often purchase high-value goods and services through online channels, but make these purchases offline through traditional means.
Digital Platforms: How Consumers Buy and Pay for Large Purchases, a Rightpoint collaboration, notes that “Consumers still prefer to manage large expenses the old-fashioned way. Buyers performed offline prepayment interactions for 75% of transactions and paid offline for 73% of them last year. In comparison, they made digital prepayment interactions 46% of the time and digital payment 27%. “
Trend lines indicate that more expensive purchases through digital means are becoming more common, but obstacles remain, largely revolving around consumer confidence and familiarity with new methods.
See also: The next BNPL Horizon report: expanding access to high-value services
Drive change in major purchases
The automotive industry is quickly taking the lead among breakout categories where consumers make expensive purchases only through digital channels.
PYMNTS reported in August that revenue rose nearly 200% in the second quarter of 2021 year-over-year for online car dealership Carvana, selling 100,000 vehicles – “a 96% increase over the previous year. ‘last year”.
It’s a similar story at Vroom, which also reported in August that consolidated revenue of $ 761.9 million was up 201% year-over-year. The company added “that e-commerce units sold jumped 172% to over 18,260 units; The average number of monthly unique visitors to the company’s platform increased 75% to 1.7 million.
Data from the PYMNTS study with Rightpoint confirms this shift, noting that “the offline digital divide varies widely by product and service, but only auto purchases tended to involve digital engagement (62%) more often than offline engagement (60%). “
See also: Digital platforms: how consumers buy and pay for their major purchases
Increasing spending power is the key
As the pandemic digital switchover heads into its third calendar year in 2022, consumers are adjusting to digital channels and payment options, making the switch to larger purchases more like an inevitable as the change is evolving towards a new set of consumption behaviors.
As the AWS study notes, “Many BNPL users see it as a viable option to increase their purchasing power,” with 28% of BNPL users responding that they could not have afforded the products and services they purchased “without the payment flexibility that BNPL options provide them.”
This study also found that the typical BNPL user would spend $ 961 on a single BNPL purchase, while “the average BNPL millennial user would spend up to $ 1,203, while the average BNPL user would spend up to $ 1,203. Generation X of BNPL would spend up to $ 1,006 on a single BNPL. -purchase activated.
Third-party BNPL providers have taken note and are responding to the larger ticket trend by increasing spending limits in some cases. For example, CNBC recently reported that “Affirm approves progress payments for total purchases of up to $ 17,500, which has proven to be very important for Peloton’s expensive training equipment and services. FT Partners, an investment bank focused on the FinTech space, estimated that 30% of Affirm’s revenue in the first quarter of 2021 came from sales on Peloton’s website.
The same story adds that “Klarna’s merchant base reports a 45% increase in average order value when a buyer pays more than four payments.”
While digital platforms: How consumers buy and pay for large purchases shows the appeal of digital browsing for big-ticket items, he also notes an aversion at the present time to pay for these products and services on shopping sites. third-party review. It can change quickly.
According to the Rightpoint Digital Platforms study, “buyers in the largest shares show high levels of interest in real estate purchases (48%), followed by automobiles (44%) and insurance (44%), with shares lower for remodeling (39%) and health services (34 percent). These results indicate significant potential for digital platforms to capture large purchases across categories by delivering quality integrated checkout-payment experiences.
See also: New data shows 88% of consumers stay offline to pay for major purchases