Unravelling common BNPL myths: Separating fact from fiction

Buy Now Pay Later (BNPL) services continue to soar, constantly showcasing new record heights. During 2023’s Cyber Monday alone, BNPL spending measured up to $940 million, an increase of 42,5% from the previous year, according to Adobe Analytics. However, with popularity comes misinformation. Let’s unravel some of the most common BNPL myths and set the record straight.

Myth 1: BNPL is just another form of credit

One prevalent misconception is that BNPL is equivalent to a traditional credit card. In reality, BNPL operates differently. In contrast to credit cards with complex terms and high-interest rates, BNPL allows users to split payments into instalments, often with no or low interest, in exchange for a small fee. The simplicity and convenience of using the favourable payment method attract consumers wanting to make purchases without worrying about accumulating substantial interest rates. In line with the growing popularity, nearly 60% of today’s consumers prefer BNPL over credit cards.

Myth 2: BNPL encourages impulse buying

Another misconception is that BNPL services fuel impulsive spending. While BNPL does provide an efficient way to make immediate purchases, responsible users can leverage it as a budgeting tool. Many appreciate the ability to plan and manage expenses with structured instalment payments that align with their individual needs and cash flow situations. Besides, when using bank-issued BNPL, the undoubtedly most preferred method, consumers can be certain that BNPL offerings align with their financial goals, ultimately helping them manage their overall spending.

Myth 3: BNPL is a hype expected to pass

Sceptics contend that the hype surrounding BNPL might be inflated and that the industry could face challenges and scrutiny as it matures. Contrary to the notion that BNPL might be a passing trend, research suggests that BNPL is not only here to stay but poised to become a fundamental component of modern consumer finance. According to Juniper Research, the payment method is forecasted to reach 1.5 billion global users by 2026. Looking at the global market size, that measures $566 billion of which the massive B2B BNPL segment is excluded. Besides, as the industry matures, regulatory frameworks are emerging to address potential pitfalls, ensuring that consumers are protected, and the market remains sustainable.

Myth 4: BNPL is only for young consumers

There’s a predominant belief that BNPL services cater exclusively to younger demographics. However, these services have gained popularity across different age groups. In fact, a recent study from Pymnts found that Gen X uses BNPL at the same frequency as Gen Z. While many individuals, regardless of age, appreciate the flexibility and ease of BNPL when managing their finances, they differ in spending choices. For example, baby boomers and seniors born before 1964, who are less likely to use BNPL than the other age groups, are more inclined to use the payment method when purchasing furniture or other more expensive items. Gen Z, on the other hand, tend to use the payment method when purchasing clothes.

Myth 5: BNPL means downloading yet another app

Although true to some extent, BNPL doesn’t always mean consumers must download a new app and be bombarded with promotional messages after purchasing an item. By choosing a card-linked BNPL service offered by a bank with an integrated white-label BNPL solution (like Sileon’s), consumers never have to interact with a third-party provider. Instead, they can handle the entire checkout process or post-purchase flow directly through their personal bank app. This means no complicated application processes and new apps to download.

Conclusion

Far from being a transient trend, BNPL has ingrained itself into the consumer experience, offering a viable and sustainable alternative in the evolving world of modern finance. For a bank or card issuer looking to gain profit on the notable trend, now is the time to act. By embracing card-linked BNPL, banks and card issuers not only cater to the changing needs of their customer base but also position themselves as innovative and customer-centric financial institutions.