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Going Mainstream Will Mark BNPL’s Second Act

When Sezzle and Target announced their three-year deal this month, it wasn’t just an ordinary tie-up. It was a milestone moment for the burgeoning business of installment payments.

In fact, Sezzle President and Co-Founder Paul Paradis told PYMNTS, Target is the first top-10 retailer in the U.S. to offer a “pay in 4” solution, and the partnership marks the breakdown of an important barrier and portrays how far buy now, pay later (BNPL) has come in the U.S. market.

“BNPL has been fairly localized to fashion and beauty, but Target is a mass retailer selling just about everything under the sun,” Paradis said. “So, I really think that this signals that BNPL is going to become more ubiquitous across retail.”

The last few years have seen a wave of new payment solutions rise, all united by the emerging consumer demand for payments that are faster, easier to use, mobile-friendly and flexible, he said.

“If you can deliver all of those and the solution looks great, you’ll generate consumer demand,” he said

The Changing Customer

The evolution of mass retail toward BNPL offerings hasn’t come out of nowhere; it is a direct result of consumers’ growing use of it in the market, Paradis said. BNPL has been somewhat slower to catch on in the U.S. market than it has in other global markets. It found its first real entrance with consumers who were otherwise locked-out of the credit markets because they had no credit or bad credit. BNPL was a tool that allowed them access to the market they likely would not have otherwise had.

But over the last four years, that has changed, he said. Consumers increasingly are using Sezzle, not because it’s their only choice but because they want to.

“Most of our consumers viewed Sezzle as a great tool for budgeting online purchases,” he said. “We’re seeing a significant shift to a more mainstream consumer audience recently. Most of our users own a credit card but use it as an emergency tool … for big or unexpected purchases, not their preferred payment method. And they’re looking for a better alternative.”

BNPL is better for an increasing number of consumers, and the future of the segment is in building out new features that make the offering more appealing, he said. Sezzle has started allowing customers to use its service to build their credit scores via the Sezzle Up feature — something that about a quarter of Sezzle users are actually doing. But the potential options are far more wide ranging.

What’s Next For BNPL

The more wide-ranging future is where BNPL will be able to grow. In the near term, Paradis said he expects BNPL offerings will be more common at mass retailers and will spread into new categories that have been slower to adopt it.

Although the pandemic has pushed it to be a largely online method, he said he believes bringing BNPL into more omnichannel context is likely to be a push that heats up over the next year.

But the bigger change he said he expects is that offerings will become richer as rewards programs become more sophisticated to foster repeat usage and build customer loyalty. That will likely go hand in hand with BNPL players trying to build for greater personalization and more shopping functionality “so that we can become the place where more customers begin their shopping journey.”

The space is also going to get more crowded as traditional banking players are increasingly drawn into the segment, he said, noting that they have fallen far short in this market thus far but aren’t going to sit on the sidelines and watch the segment grow without them forever.

“They’re good at lending, but they haven’t been good at providing a really seamless, easy-to-use digital experience,” Paradis said. “I like to think of BNPL as being at the crossroads of commerce and financial services, so I would look to the innovations in those two industries as a guide to the innovations that you’ll see within BNPL as a category.”

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