Why buy now, pay later options are popular with customers – and good for business

Many customers turn to online shopping for convenience. People quickly find the products they want, pay for them, and check out. Payments also need to be convenient and familiar. Buy now, pay later (BNPL) options have become popular with many people because they are indeed convenient and simple to use – especially since they provide customers with more flexibility and the ability to pay at a pace that works for them.

Why offer BNPL payment options?

BNPL options offer customers both an alternative to credit card payments and a smart budgeting tool. Typically, BNPL payment options offer installment payments over weeks or months, sometimes with no interest. BNPL payments are also useful for businesses, which can be paid up front for the purchase, leaving time-consuming payment collection to third parties.

Who uses buy now, pay later options – and why?

Market research generally shows that buy now, pay later options are most popular with younger people¹ – but “younger” can mean a broad category of customers. Millennials and Gen Z customers tend to be frequent users of BNPL payment options when given the choice: When PayPal analyzed 289,000 BNPL users in the United States from January through December 2022, 51% of the PayPal Pay in 4 users were millennial and Gen Z, while 35% were Gen X.¹

But knowing who’s generally using BNPL doesn’t answer the big question: Why are they enthusiastic adopters of these payment choices? In one survey, 81% of respondents said that BNPL offers customers unique benefits, such as flexibility and convenience.²

When businesses provide a BNPL option, they can help customers buy the products they want and give them more time to pay, using installment payments – right at checkout. The ability to instantly choose to pay over time could be a deciding factor in whether or not to finalize the purchase.

Not surprisingly, millennials and Gen Z people are comfortable with digital tools and online shopping. Gen Z shoppers in particular are eagerly embracing BNPL, P2P (peer-to-peer) payment apps like Venmo, and digital wallets like Apple Pay.³

Keep in mind, however, that millennials and Gen Z don’t have a lock on the BNPL user community. An estimated 30% of Gen Xers are likely to adopt the BNPL payment method by 2025.⁴

How can BNPL’s popularity help businesses?

When large businesses offer BNPL options, they’re engaging a possibly powerful engine for growth. For example, JTV – a company selling jewelry online and on TV – used Pay Later, the BNPL option from PayPal, to ensure a successful launch of the business lines Jedora.com and Gemstones.com.

With approval rates around 90% for customers using the BNPL option, JTV has significantly reduced checkout friction and has increased average order value.

Younique, an online seller of beauty and skincare products, also used Pay in 4 to grow its business. The company began promoting Pay in 4 with messaging on product, cart, and checkout pages on its US website. After seeing 218% growth in sales volume and a 209% increase in Pay Later transactions, Younique plans to add Pay Later messaging to its Australia and Europe sites.

Best practices for choosing BNPL payment options

When Gen Z customers discover that their favorite brands offer BNPL payment options, they’re likely to stay loyal to these businesses – in fact, 65% of Gen Z BNPL customers are repeat users.⁵ Best practices include the following:

Consider security. Seek out BNPL products that offer the same high standards for security as other payment options.

Reduce friction. Choose BNPL products that speed customers through checkout instead of slowing them down.

Promote BNPL options early. BNPL provider tools should draw attention to the payment option at several points in the buying journey – such as product pages, category pages, and shopping cart pages – not only at checkout.