Buy Now, Pay Later: The Show-stopper Payment Method for Millennials and Gen Zs
The prevalence of buy now, pay later (BNPL) continues to rise across all age groups, with American consumers embracing the method at a pace that increased by 80% between 2020-2021. Given its attractiveness for millennials and Gen Z, Buy Now and Pay Later is a trendsetter concerning the future of the payments sector. Gen Z consumers in India are impacting e-commerce market dynamics due to their extensive use of BNPL (buy-now-pay-later) services.
Where do Millennials and Gen Zers stand?
Youngsters drive the majority of BNPL rise, with millennials accounting for 40% of BNPL customers in 2020, the highest proportion of users per age group. Consumers in Generation Z have begun to utilize BNPL quicker than their millennial contemporaries, so it's projected that they will inevitably catch up.
Most BNPL users will still be millennials, making up 37% of all users, but 44% of all Generation Z customers are expected to utilize BNPL at least once before the year ends.
Users across both classes report being quite aware of the big BNPL operators, and when it becomes a standard form of payment, BNPL is expected to take up a significant amount of space in their purses.
What fuels BNPL's lightning popularity?
Payment choices for online purchases are changing from credit cards and cash to e-wallets and BNPL. But why is BNPL such a desirable choice? We list down five factors that led to its success.
The convenience of BNPL
It represents the most significant factor behind the acceptance of BNPL and other quick payment options by Gen Z and millennial shoppers when making purchases online. Accessibility and speedier delivery are becoming more important factors for Gen Z and millennial shoppers when selecting their online purchasing venues. You can finish a BNPL payment almost instantly, and the customer can pay the amounts back later.
Insufficient alternative credit
Several banks and traditional lending agencies will not provide their services to borrowers with no credit history or income. Since many Generation Z and millennial customers are first-time lenders, banks will not issue them a line of credit or a loan except if their parents provide security. First-time lenders have credit facilities thanks to BNPL products, which use alternative data and artificial intelligence to analyze information about the user and lend money suitably.
Numerous offline retailers have implemented a QR code-based payment method. Due to the availability of multiple financial apps like MobiKwik, Paytm, PayU, Zest Money, and others, consumers who make offline purchases can also take advantage of BNPL programs. BNPL can therefore be used to create a wider variety of investments.
When a customer buys an item online through an e-commerce platform and cancels that order, the online retailer will provide a refund, but it will take a few days before the amount appears in the customer's bank account. When a customer purchases through a BNPL arrangement and changes their mind, the refund is processed immediately, and the obligation disappears after the transaction is stopped.
The ease of EMIs
Several Generation Z and millennial customers use BNPL, which enables them to divide small purchases into manageable EMIs to be paid across three or even more months of interest-free duration for small purchases. People can now purchase products that were previously beyond their price range.
Benefits of Buy Now, Pay Later
Financial accessibility is an important selling point for BNPL services, especially for younger generations. Such options give younger audiences, whose cash flow is typically more constrained, greater payment flexibility, particularly for more expensive items. According to a The Ascent survey conducted in March 2021, 45.0% of US adults who used BNPL indicated they chose these solutions to buy products that would not have fallen within their budget.
Electronics, fashion accessories, home furnishings and appliances, and other digital entertainment products, including films, songs, and games, are the hot products consumers purchase utilizing BNPL services. Many are expensive goods, and a younger customer base typically buys some.
BNPL is employed to keep credit card debt manageable or strike a balance between paychecks. BNPL suppliers will have to flex their muscles rather than supply users with a platform that enables them to buy a sure-to-impress item of clothes and pay it off in a matter of weeks if they want to be successful shortly and keep Millennial and Generation Z clients. The challenge will be to instill new purchasing behaviors and lure them with innovative product portfolios.
A word of advice for the Millennials and Gen Zers
It would help if you established some essential buy now, pay later boundaries for yourself. Maintain the desired number of purchases now, and pay later accounts you plan to use at a particular time before you are again presented with this choice. Examine the terms of repayment that the various BNPL organizations implement. You also want to determine what mishaps or errors would have detrimental economic implications.
In a nutshell
Due to the surge in e-commerce during the pandemic, BNPL companies have established a reputation and a sense of trust in the hearts of consumers. The perfect extended payment service for the tech-savvy has become frictionless and free of interest.
The Gen Z generation is getting better at spending, while millennials are the biggest purchasers. Split financial transactions will be crucial for these young customers since they want advantages compared to conventional credit alternatives, convenience, and versatility.