The rise of mobile shopping over the last decade has driven a huge demand for alternative payment methods. Nowadays, options within the checkout process, like PayPal and ApplePay, are table stakes in the ecommerce industry.
But what about Buy Now, Pay Later (“BNPL”) services? Social Bulldog and the ecommerce industry as a whole has observed massive growth in these services over the past two years. Are we approaching a new era where BNPL in your checkout is vital to maintaining a competitive conversion rate?
Buy Now, Pay Later services provide short-term financing that allows consumers to make a purchase and receive product immediately, then pay for their purchase (usually interest-free) in later installments.
The BNPL industry saw double digit growth over the 2021 holiday season. BNPL revenue was up 27% YoY while orders were up 10% YoY. And when indexed to 2019, revenue was up 475% (four hundred and seventy five percent!) and orders were up 479%. The impact that these services will continue to have on the customer experience is undeniable.
Shopify has publicly claimed that BNPL services decrease the chances that a customer will abandon their cart. Other big players are making major moves to embrace the BNPL movement.
- Amazon partnered with BNPL service, Affirm.
- Walmart replaced layaway with Affirm. (Go off, Affirm!)
- Square acquired After Pay.
- PayPal will stop charging late fees on BNPL payments to remain competitive with other services.
On average, consumers are spending $224 using BNPL (per order), with roughly 3 items in their shopping cart. Social Bulldog clients observed a 25% higher Average Order Value in Facebook acquisition ads that promoted Afterpay.
The growth in BNPL is also attracting government attention. The Consumer Financial Protection Bureau released said that it is looking into the risks and benefits of these “fast-growing loans” from the five leading services.
Can BNPL revenue sustain the level of growth that it experienced from 2020 to 2021? We really don’t know. But we do suggest that similar to Amazon and Walmart, you embrace it! Get to testing those BNPL ads and monitor the following when testing:
- Does this increase the AOV of my current audience?
- Does this unlock a totally new audience?
- Can I replace acquisition discount offers with BNPL services?
- How does this impact my checkout conversion rate?
- Do these ads perform better in acquisition or retargeting?
Want to learn more about Buy Now, Pay Later from the customer standpoint? See which BNPL apps Investopedia is recommending to consumers.