(New York, NY) Over the past few years, post-purchase issuer-provided installment plans have surged in popularity, thanks to offerings like American Express Plan It, My Chase Plan, and Mastercard Installments. Recent data from Auriemma Group’s The Payments Report indicates these plans are now rivaling in-store installment offers. Availability increased 18 percentage points since Q4 2019, with 40% of credit cardholders having been offered this option, while in-store installment plans remained stagnant at 36% over the period.
“Post-purchase installment plans provide cardholders the benefits of splitting payments without the hassle of signing up for a new product,” says Jonathan O’Connor, Senior Manager of Research at Auriemma. “It is no surprise these options are catching up to in-store Buy Now, Pay Later offers. Cardholders with access to this option enjoy the benefits of both products.”
While enrollment with Buy Now, Pay Later at the point-of-sale in-store is slightly higher than post-purchase issuer-provided installment plans among debit cardholders (19% and 12%, respectively), again the trend line is more favorable for the latter, which has grown 7-percentage points, compared to 4-percentage point growth for in-store enrollment.
And when asked which option they would prefer, over two-thirds of debit cardholders consistently say they would rather pay with their card at the point-of-sale and later enroll their purchase onto an installment plan with a card provider. The remaining one-third prefer enrolling with a Buy Now, Pay Later provider, like Klarna or Affirm, at the point-of-sale.
“Given the prevailing trends and cardholder preferences, we expect post-purchase issuer-provided installment plans to outpace in-store Buy Now, Pay Later options in the coming year.” says O’Connor. “Our next issue of The Payments Report will delve further into these products to explore their usage and potential trajectory in light of the expanding installment lending landscape in retail.”
Survey Methodology
The Payments Report
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in March and April 2024 among 800 adult debit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
About Auriemma Group
For 40 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, email Jonathan O’Connor at research@auriemma.group.
(New York, NY) In the ever-evolving landscape of retail finance, Buy Now, Pay Later (BNPL) is reshaping the way consumers approach their borrowing and purchasing decisions. As store card ownership wanes, BNPL has emerged as a compelling option for modern shoppers seeking flexibility and convenience. Auriemma Group’s latest issues of The Payments Report and Cardbeat US uncover the factors driving point-of-sale decisioning between BNPL and store cards, and how a good BNPL experience can increase store card acquisition.
Buy Now, Pay Later directly competes with store cards at the point-of-sale.
BNPL offers have become commonplace when shopping online or in-store. According to The Payments Report, 64% of debit cardholders say they have been offered an installment plan online (up from 45% in Q4-2019). In-store offers have also increased slightly, now at 36%. And about half of those offered an installment plan in either channel report enrolling in the past 12 months. This momentum is in direct contrast to store cards, whose ownership has dropped 14-percentage points (now 39%) since 2015.
“We found that at the point-of-sale cardholders are most interested in applying for these products for larger ticket size purchases,” says Jonathan O’Connor, Senior Manager of Research at Auriemma. “However, when both Buy Now, Pay Later and store cards are offered, cardholders are near evenly split on which option to select, with a slight preference towards Buy Now, Pay Later.”
But what would happen if retailers only offered store card applications at the point-of-sale? Not offering BNPL at the point-of-sale would have a marked impact on store credit card enrollment. 54% of those more likely to select BNPL say they would be likely to apply for a store card instead, if it were the only option presented to them.
Fee amounts and interest rates inform cardholders’ application decisions.
About four-in-ten debit cardholders say a retailer’s recommendation would make them likely to apply for a BNPL plan (41%) or store credit card (35%) at the point-of-sale. However, according to Auriemma’s research, it is the least important of the factors tested.
While a retailer’s recommendation or signage may initiate decisioning, BNPL and store card acquisition often hinges on fees, rates, and benefits. Over eight-in-ten debit cardholders say these factors are at least somewhat important when deciding whether to apply for a BNPL plan or store card at the point-of-sale. Second tier factors include trust in the brand, credit score impact, and one-time discount offers.
“Buy Now, Pay Later plans offer consumers payment flexibility without the commitment of applying for a credit card,” says O’Connor. “And while in many ways Buy Now, Pay Later can be seen as a competitor to card product acquisition and usage, the method can act as a gateway to a future card relationship.”
A good Buy Now, Pay Later experience could open the doors to store card application.
While there is much to be said about the ways BNPL competes against store cards, there is also evidence that the option could create a pipeline to store card enrollment. According to Cardbeat US, 41% of credit cardholders say a good BNPL experience with a brand they shop at regularly is likely to encourage them to apply for a store card, if offered. This is particularly true of Gen Z and Millennial cardholders.
54% of credit cardholders who were approved for a BNPL plan say they were offered a store card at some point during their experience. Notably, 69% of these cardholders applied and were approved for a store card during that time, highlighting just how synergistic the two products can be.
“Buy Now, Pay Later does have an impact on store card application, but the pendulum swings both ways,” says O’Connor. “Some consumers will choose Buy Now, Pay Later at the point-of-sale over and over again, while some will inevitably find their way to store card enrollment through positive BNPL experiences, demonstrating the potentially symbiotic relationship between the two offerings.”
Survey Methodology
The Payments Report
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in March and April 2024 among 800 adult debit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
Cardbeat US
This Auriemma Group study was conducted online within the US by an independent field service provider on behalf of Auriemma Group (Auriemma) in March 2024 among 800 adult credit cardholders. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying.
About Auriemma Group
For 40 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, email Jonathan O’Connor at research@auriemma.group.
(London, UK): Buy Now, Pay Later (BNPL) services continue to see significant growth across the UK and European markets. Over 19 million UK consumers have used Buy Now, Pay Later (BNPL) services, including 40% of credit cardholders, according to Auriemma Group’s latest issue of Cardbeat UK.
Much of this growth can be attributed to Klarna and Clearpay, which are the top two providers used and preferred by BNPL users. As of mid-2023, half (51%) of Buy Now, Pay Later users have used Klarna before, while 47% say it is their preferred provider. Use of Clearpay remains notably lower, with one-quarter (24%) of Buy Now, Pay Later users trying the service, and 10% preferring it over other providers. Regardless of the provider, the BNPL experience is overwhelmingly positive for those who have used the service. Over nine-in-ten (91%) BNPL users say they had a positive experience using it (up from 74% in Q4-22).
While expectations of regulation coming to the sector have placed a spotlight on Buy Now, Pay Later practices, discussions have not dampened customer appetite for BNPL. New providers continue to enter the marketplace whilst established players continue to increase their investment and focus on service enhancements. Earlier this month, Klarna confirmed an intention to continue investing in the UK market despite calls for tightened regulation.
Whilst growth continues with the younger generations (54% of credit cardholders under 35 have used at least one BNPL plan), there is increasing evidence that the relevance and appeal of BNPL has broadened. The UK Finance Payment Market Report found that the percentage of pensioners now using BNPL services doubled in 2022 compared to the previous year.
“UK banks and traditional lenders are beginning to recognise that BNPL is here to stay as a way for consumers to pay,” says Simon Cottenham, Head of International Partnerships at Auriemma Group. “The key for these players is to create a product, value proposition and customer journey which can appeal in this competitive marketplace.”
Similar trends are being seen in other European markets with Germany reporting 30% growth in BNPL use in the last year. Around one-quarter of consumers in Europe are believed to have made a purchase using BNPL with annual growth rates forecast in the 20%-40% range by most industry observers.
Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in July 2023, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.
About Auriemma Group
For nearly 40 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.
(London, UK): Klarna is the leading Buy Now, Pay Later (BNPL) provider in the UK with 13 million customers using its products and services, but the Swedish FinTech reported $1bn of losses in 2022, its largest ever, adding to the strain of incoming regulation following the UK Government’s draft legislation in February.
Despite losses, the UK giant continues to have a strong foothold in the marketplace. According to Auriemma Group’s latest issue of Cardbeat UK, 50% of BNPL users say they prefer Klarna to other BNPL brands. Clearpay comes in a distant second at 16%, with the remaining providers such as Laybuy in single digits.
Klarna and its competitors offer similar services, including 0% interest on instalment purchases, and weekly or monthly repayment plans. One of the key differentiators, however, is each provider’s portfolio of merchant partners where customers can utilise the competing services.
For example, ASOS, one of the UK’s largest online retailers with 8.9 million customers, lists Klarna and Clearpay as BNPL options at checkout, while major sports retailer JD Sports has deals with Klarna and Laybuy. So, is it really just availability at checkout that drives usage?
Auriemma Group’s research found that 31% of BNPL users have previously tried Clearpay and 12% tried Laybuy, compared to 50% who have tried Klarna. Furthermore, while 45% of BNPL users have only used one BNPL provider, a notable 36% have tried two or more, highlighting a willingness to use alternative providers even if they are not preferred. This open tendency could play to the advantage of regulated entities following February’s draft legislation.
“Though Klarna remains the top BNPL provider for the majority of cardholders, a considerable portion have tried other options,” says Jaclyn Holmes, Director of Research at Auriemma Group. “This shows that accessibility can take priority over brand loyalty, highlighting an opportunity for the competition.”
While availability at checkout plays a large role in BNPL selections, familiarity with a provider is also important. 42% credit cardholders say they would use Klarna if presented the option at checkout because of familiarity with the brand. This supersedes user experience (23%), attractive rates (15%) and customer service (10%). More generally, 34% of credit cardholders say that familiarity with the provider has the greatest influence on BNPL usage though the strength of the terms and conditions (33%) are also a notable factor.
As regulated entities like NewDay with NewPay and Zopa make headway in the space, the focus on consumer awareness will be as critical, if not more, as product strength and customer experience.
“Regulation may require changes from Klarna and others that disrupt their current customer journey, opening the door for competitors already accustomed to regulation,” says Holmes. “If new players can quickly build brand awareness and availability at the point-of-sale, we could see Klarna more readily challenged as consumers’ top choice.”
Auriemma Group will continue to monitor this space closely in upcoming Cardbeat studies and within its Customer Service Roundtable groups.
Survey Methodology
This Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma in October 2022, among 80o+ adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.
About Auriemma Group
For more than 35 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.