With the weather getting cooler and leaves on the trees turning to orange and red, consumers and retailers alike are gearing up for the holiday shopping season, with buy now, pay later (BNPL) providers hoping the good fortune seen over the past several months can continue.
As students prepared to return to the classroom in recent weeks — for some the first time in nearly two years — Brad Lindenberg, co-CEO of Zip U.S., said the payment provider saw a 50% increase in BNPL use at retailers such as Famous Footwear, Newegg and Lids.
“Back to school is one of those time periods during the year where families need to outlay money for their kids and really need to buy these things before school starts,” Lindenberg said. “And BNPL is a great tool to be able to do that and also budget over the next few weeks as they get paid.”
The increased use during back-to-school shopping, typically one of the biggest consumer spending events of the year, also points to a big holiday season for Zip and other BNPL firms, Lindenberg said, making the end of the year possibly the biggest quarter Zip has ever had. Zip always sees “massive spikes” in usage around Black Friday and Cyber Monday, he noted, but BNPL overall is becoming more well known, leading to even greater use.
“There’s been a lot of pent-up savings, and people who’ve been receiving stimulus and also been locked up at home really had a real opportunity to go out and shop,” Lindenberg said. “And you couple it with the awareness of our product — there’s been a huge shift in awareness of this category … and consumers are now beginning to utilize our services as their primary card and their primary way to pay.”
Walmart last week said it wouldn’t offer its holiday layaway program this year, instead telling customers to use its BNPL option through Affirm. The retailer had scaled back its seasonal layaway options at most stores last year, a company spokesperson told PYMNTS, and “based on what we learned, we are confident that our payment options provide the right solutions for our customers.”
Room for More
Even with all this growth, only 29 million Americans, or 14% of online consumers, have used BNPL, according to PYMNTS research, which Lindenberg said leaves “a lot of greenfield opportunity” for merchants and payment providers.
“There’s a lot of people who don’t know about the product, about the category, who are going to continue to learn about it and use it,” he said. “And then, on the merchant side, some of the largest merchants … don’t have a fully-fledged BNPL offering.”
Some, Lindenberg noted, only offer BNPL for higher-price products and don’t have a solution for low order values, “so it’s not fully penetrated. There’s a lot of upside there.” eCommerce giant Amazon only just started offering BNPL itself, partnering with Affirm last month to provide the payment option to consumers.
While Zip has 50,000 merchants that are fully integrated into its payment ecosystem, Lindenberg said the company also allows consumers to use its product wherever they shop using a digital wallet, opening the doors to about half a million merchants each month.
“We are really just a payment channel,” he said. “Anyone can use us anywhere, whether it’s beauty, auto, healthcare.”
Lindenberg said he’s more focused on average order value (AOV) than specific verticals, noting that while Zip’s limit is about $1,500, most online orders are between $100 and $120.
“Our product, the pay-in-four product, is fantastic for that range, and that’s really where we try and focus on terms of the verticals that we go after,” he said. “We’re very open. We’ll sign up pretty much any vertical that makes sense.”
Opening BNPL for B2B Payments
Zip has also been getting an increasing number of inquiries about BNPL for B2B payments, especially from merchants who are trying to buy ads on social media or contractors who need to buy materials for a job.
In Australia, where Zip is headquartered, the company has launched a feature with Facebook that allows businesses to pay over time for ads, which Lindenberg said allows those with a customer acquisition funnel that has a short duration in terms of payback to frontload their advertising spend.
To be sure, offering BNPL for B2B payments requires “a bit of a different risk decisioning viewpoint,” Lindenberg said, since Zip is making a decision based on a business or entity, not an individual, but it mostly comes down to different data points.
“So, it’s really just about getting comfortable with how you do that,” he said. “But once that’s lined up, it should be pretty straightforward, and I do think that’s another channel that we’ll be going after soon.”