Should Your Store Offer Buy Now, Pay Later?

According to a Cornerstone Advisors study published in Forbes, 7% of all Americans have made a BNPL purchase this year.

For context, 7% is not a small amount, BNPL purchases are estimated to represent $24 billion, up from $20 billion in 2019. 

According to Worldpay’s 2020 Global Payments report, this is the fastest-growing global payment method. In North America, it’s expected to be 3% of e-commerce payments by 2023. In EMEA, it’s already 6% and could grow to 10% by 2023.

So why is this relevant now? 

Because we finally got to see behind the curtain of an American BNPL company when Affirm released its IPO filing documents. 

Affirm, if you aren’t already familiar, provides installment loans to online shoppers for over 6,500 merchants.

Shoppers can choose to pay over 3-36 months depending on the size of the purchase and merchants get their money upfront with a discount rate of between 2-8%. 

This might seem high but consider the other benefits: 

1. Increased Order Size – Affirm claims merchants can expect an 85% increase in their average order value.
2. No Chargebacks – Affirm assumes all fraud and chargeback risks. 
3. Consumer Confidence – Gen Z & Millennials represent $2.5T worth of spending in 2020 and are losing trust in credit cards and their hidden fees. Affirm has upfront transparent pricing. 

As an investor or even just an observer of the BNPL market, it’s also interesting to note that Affirm claims to have a delinquency rate much lower than credit cards, currently averaging 1.1% compared to 5.7%. 

Before deciding to bolt-on BNPL to your site it’s worth taking Affirm’s numbers with a grain of salt as Peloton currently makes up 28% of their revenue.