I’m a cheerleader for women and an accountant bursting with personality.
If you’re sitting there having 90s flashbacks and wondering whether the explosion of ‘buy now, pay later’ sites are just a modern-day layby, you’re not alone. It’s true that we live in an era of instant gratification and constant notifications, and it can often feel like it’s just one ping after another when you’re trying to run a business.
From a customer perspective, there are seemingly endless choices when it comes to buying products and services. Having options is great, and these ‘buy now, pay later’ options are certainly convenient and accessible, giving many of us new possibilities and opportunities to participate in the eCommerce revolution. Putting to one side that they can also be ‘all too convenient debt traps’ for customers, what do they mean for businesses as we try to desperately keep pace with customer demand and modern technology?
The Rise of the ‘Buy Now, Pay Later’
First, we should probably explain what a so-called ‘buy now, pay later’ service actually is. Buy now, pay later or ‘BNPL’ arrangements allow shoppers to purchase goods and services and then pay off the purchase price over a specified period of time. So, yes, they are effectively a modern-day version of layby, but with a few twists:
- You don’t pay interest on the purchase. Instead, BNPL providers make their money through either charging retailers to use the platform, or by charging monthly, setup or ‘late’ fees to customers (e.g. Afterpay).
- You get the item straight away, rather than having to wait until it’s paid off first.
- Instalments or payments are made to the BNPL provider, not the store you purchased from – so businesses get paid in full and don’t take on as much of the risk.
Sounds pretty great, but things aren’t always as they seem.
In Australia, the BNPL industry is regulated by The Australian Securities and Investments Commission (ASIC) and it has almost doubled in the 12 months according to ASIC’s latest reports. There are currently 10 providers in Australia with new players on the scene all the time, which means that, when you’re running a business, it can be hard to keep up.
So, we’ve put together a list of things to keep in mind when considering whether or not to use a BNPL for your business.
1. Buy Now Pay Later Is Predominately Used By Millennials And Gen-Z
We’ve spoken before about how important it is for business owners to know their audience. Beyond tailoring your offering and content to their needs, it will help you make decisions like; whether or not to use a BNPL provider.
Knowing who is predominantly using BNPL services is a great place to start with your decision-making! Similarly, if you’ve already jumped into partnership with a BNPL provider, you might want to know who their key demographic is so that you can take advantage of it.
Given that ‘buy now, pay later’ services are relatively new (or at least layby revamped), it is probably no surprise to find out that Millennials and Gen-Z represent the largest proportion of customer users. In fact, as of 2021 in Australia, 18-35 year-olds made up 62% of customer users. Why? Not only is this segment generally more tech-savvy and comfortable with online shopping and eCommerce than other generations, they also tend to be more averse to debt than older age groups. Data from the ASIC says that two in five people who buy through BNPL schemes are low-income earners and, of those, two in five are students or part-time workers.
And it’s not all designer shoes either. According to Mozo’s 2021 Buy Now Pay Later Report, 65% of BNPL users are buying bigger ticket items like fridges, heaters or new beds, and trying to avoid the interest charges and debt associated with buying these items using traditional credit cards. This is followed by ‘luxury items’ (57%) like clothing, jewellery and car accessories, and essential items (28%) like food.
This is to say that, if your target audience sits squarely within the Millennial and Gen-Z demographic, you are likely missing out on a significant business growth opportunity by not offering BNPL options. If your audience is older, it might not be as critical to your ongoing sustainability and longevity at this stage.