Utilizing payment technology to respond to emerging consumer behaviour

Business of Fashion hears from Greg Lisiewski, PayPal’s VP of Global Pay Later Products, to glean insight into PayPal’s understanding into global shopping behavior, emerging payment innovations, and the growth levers to be found in more flexible payment offerings.

How is the payment solutions market changing?

McKinsey¹ suggests that U.S. e-commerce experienced ten years growth in just the first three months of the pandemic. However, it’s interesting to consider that 2020 wasn’t marked by new technology. Rather, it was about behavioural change catching up with technology.

Consumers were asking, “What’s going to happen next week? Am I going to have a job? If I have one, am I going to get paid?” For many consumers it was more about managing cash flow — not simply paying for goods or services over time. Now, it’s interesting to watch customers engaging with merchants and recognizing the ease of these new solutions — paying predictably, picking up in-store. That’s why many of these changes will stick. It’ll be interesting to see the next set of technologies and experiences that will develop off the back of this new consumer mindset.

New data from fintech research specialists Kaleido Intelligence² shows that $680 billion will be spent by global consumers using buy now, pay later over e-commerce channels in 2025 — a forecasted 92 percent rise from 2019 levels.

What do you anticipate will be the next evolution in Pay Later services?

Creating seamless and frictionless in-store experiences will become a big part of pay later.

Buy now, pay later is certainly still building — 20 to 25 billion purchases were made last year — and the expectation is it will grow to nearly 1 trillion by 2025. Now, we’re seeing e-commerce strategies moving to omnichannel solutions that blend the digital and physical. That really is the key – meeting consumers with payment flexibility where and how they want to shop and/or pay.

What insights can PayPal share into how global shopping behavior is changing due to flexible payment terms?

It was already fast-growing across the globe. From Australia, which has long been immersed in this new age of short term or low average order value products, to Brazil and Mexico, and the commerce-driven economies of the US and the UK.

Often, in the early days of the new iteration of buy now, pay later, there was a lot written about millennial aversion to credit. While there’s some truth in it, I think what’s being proven is credit is often driven as much by life stage. As millennials enter their 30s, they’re more likely to be raising families, buying homes, and travelling more — there are expenses that traditional credit products are just needed for. It’s hard to buy an airplane ticket and manage vacation expenses without a credit card.

The other thing that has happened, particularly for the Gen-Z consumer, is the rise of the subscription lifestyle.³ Consider music — they pay under ten dollars a month to listen to any song they want, but don’t purchase individual records. For content and TV, they have subscription plans. For books, a subscription plan. Clothing, they can rent it. That whole subscription idea of paying X per month acts as a nice dovetail into instalment payments for a product. It fits right into that fundamental change in behavior.

How is the path to purchase changing?

There has never been a better time to take advantage of innovations. Retailers don’t have to invest millions of dollars upfront to get complicated logistical systems or custom solutions in place. The ones who are on top of that, and are platform-nimble, are the retailers that are ultimately creating the early wins — helping to create lasting loyalty with consumers.

“Innovation happens when a retailer figures out how to tailor available tech to their customer experience in a way that truly fits their brand.” — Greg Lisiewski

What do you anticipate will be the next evolution in Pay Later services?

One of our top-level missions at PayPal is to democratize financial services to serve both merchants and consumers. On the retailer side, we’re evolving our overall commerce platform to offer as complete a solution as possible, not just in terms of pay later, but in payment acceptance, reporting and logistics. We want to be there for our partners before, during and after the purchase.

In terms of categories, fashion and home goods have been the top performing verticals across the pay later space, but I think you’ll continue to see growth in other verticals. Travel, as it opens back up, lends itself well to buy now, pay later solutions.

How is PayPal evolving its partnerships with retailers and merchants?

Ultimately, one of our top-level missions at PayPal is to democratise financial services to serve both merchants and consumers. On the retailer side, we’re evolving our overall commerce platform to offer as complete a solution as possible, not just in terms of pay later, but in payment acceptance, reporting and logistics. We want to be there for our partners before, during and after the purchase — support as many journeys as we can, linear or non-linear.

From a PayPal perspective, one of our core advantages is bringing trust to the equation for retailers. We’re a brand that’s been around for over two decades and is the second most-trusted brand in the world, according to Morning Consult. We also have considerable scale — 32 million plus merchants on the network and over 400 million consumers. We’re able to use that scale to turn it into data and insights that we can invest back into features and functions that help both sides of our network. Now, we’re focused on geo-expansion, and have announced plans to expand the offering into markets in Europe before the end of the year. We want to continue to extend our value to consumers, and turning that into features and insights for merchants to grow their businesses.