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Is Buy now, pay later (BNPL) taking over credit cards?

Buy Now, Pay Later is one of the fastest-growing online payment methods in the Netherlands, the UK, the US, as well as France, Australia, Brazil and Japan. As demand for BNPL solutions continues to grow, Afterpay and Stripe partnered with the goal to expand the reach of installment payments even further.

15/3/2021

In this article, we will breakdown this announcement, provide insights on what makes this strategic partnership interesting, and as always, provide our take on how this news impacts the payments landscape.

monthly installs of top 4 US buy now pay later apps
Growth of BNPL usage in the US. Source: Sensor Tower

Under this partnership, merchants integrated with Stripe are able to offer Afterpay, providing shoppers the opportunity to pay in 4 instalments for their purchases without having to take out a traditional loan or pay upfront fees. 

To understand the potential motives behind this partnership and its strategic timing, it is important to look into how the E-commerce landscape has evolved.

The pandemic has undoubtedly accelerated the growth of E-commerce and pushed the growth of new merchants, customer segments and even types of products. In fact, E-commerce reports revealed that 50% of E-commerce merchants experienced a more than 100% increase in their revenues during the pandemic.

The growth in E-commerce has fuelled the BNPL solutions even more, which are predicted to hit $357bn by 2025, which represents a whopping 30% of all estimated E-commerce spend.

With this information in mind, it is clear that Stripe is tapping into this lucrative opportunity, with a possible goal to become a big player in the field of BNPL.

Afterpay and Stripe are also extending the payment service to top e-commerce platforms, with Squarespace—the all-in-one website building platform—being the first platform to leverage the partnership and offer Afterpay to its customers.

By offering Afterpay, Squarespace enables merchants to build a fully integrated checkout experience with ease. Merchants will also experience the benefits of offering customers a flexible payment option, which is proven to attract new customers and deliver higher conversion rates and order value. Understandably, bnpl is one of the top requested features from squarespace’s customers. 

As Millennial and Gen Z consumers are demonstrating a clear preference for flexible payment options, Afterpay is equipping retailers with the tools to meet this growing consumer demand - offering the younger generation a way to pay in instalments.

The main takeaways

BNPL will continue to be one of the fastest growing and one of the most favored payments methods. But, the growing popularity of this solution poses the question: Is this an indicator of the dismantling of traditional loans such as credit cards and those provided by retail banks? One might make that conclusion by simply comparing the growing BNPL revenue to the decrease in the number of credit cards issued, especially in markets where credit card penetration rates are traditionally high, such as the US.

We certainly believe that the convenience BNPL offers cannot be competed with at the moment. At the same time, that doesn’t mean that BNPL is the perfect solution for high stake transactions for which loans and credit cards are. Do you think that the rising demand for BNPL is taking over traditional loan arrangements?

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