Buy Now, Pay Later: Understanding Consumer Behavior

Executive Summary

Around 55% of the U.S. adult population has tried a BNPL service. So, what are these services? How do they work? Who is using them, and why? 

BNPL is the result of a combination of digital transformation in both shopping habits and financial services. In many ways, BNPL services are a digitalized version of their physical, in-person precursors. As an example of “embedded finance” where the financial offer (payment and credit) is integrated into the shopping experience, BNPL has the potential to shift the consumer credit market from credit cards to merchant-based credit seamlessly. 

This research brief maps out the BNPL solutions available in the U.S., shows a digital ethnography on selected BNPL solutions, and analyzes the data to identify trends and challenges as well as implications for credit unions.

Credit Union Implications

Like many other industries, financial services are going through digital transformation as technology changes. A combination of mobile services, internet access, and the power to harness very large amounts of data is opening up new ways of meeting a customer's changing needs and has been attracting new competition to the financial services landscape. Credit unions looking to keep up with fintechs and their members' evolving habits should: 

• Take BNPL seriously. Credit embedded in the online and mobile shopping experience are attractive to consumers because they are generally more interested in the purchase than the financial solution—as long as it works. Consumers, especially younger ones, are likely to try out and potentially prefer BNPL to other options.
• Offer low-cost credit products with installment payments. One simple starting point is to take advantage of existing credit card partners and activate their installment solutions.
• Use BNPL to explore longer-term solutions. There is potential to build in-house solutions in connection with fintech partners and/or merchants directly. Use BNPL as practice to learn how embedded finance may work in the future, and to identify opportunities for your credit union to remain relevant.

Download this research today to understand why BNPL is being put in the context of innovation in financial services and why this type of payment is attractive to customers.