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Buy Now Pay Later (BNPL) services have exploded in popularity in recent years, shaking up the world of e-commerce and consumer finance. These services allow shoppers to split their purchases into installment payments, often with no interest or fees, providing a flexible alternative to credit cards or paying upfront.

But just how widespread is the use of BNPL today? The data shows that adoption of these payment plans has surged, especially among younger consumers, and is poised for even greater growth in the years ahead.

BNPL Adoption by the Numbers

The headline statistics around BNPL usage are eye-opening:

  • BNPL accounted for $97 billion in global e-commerce transactions in 2020, up from just $24 billion in 2019, per Worldpay‘s 2021 Global Payments Report
  • That makes BNPL the fastest-growing e-commerce payment method, with a year-over-year growth rate of 292% in 2020
  • In the US, BNPL adoption reached 37% among online shoppers in 2021, up from just 12% in 2017, per a survey by The Motley Fool
  • 55% of Gen Z consumers and 40% of Millennials in the US said they had used a BNPL service as of 2021, according to Cornerstone Advisors

This data paints a clear picture: BNPL has gone mainstream, and usage is growing exponentially. But to truly understand the BNPL landscape, we need to dive deeper into the demographics of who is using these services and for what.

Generational Differences in BNPL Use

While BNPL has gained traction across age groups, adoption is particularly high among younger generations. Here‘s the breakdown of BNPL usage by age in the US, per a 2021 Ascent survey:

  • Gen Z (ages 18-24): 62%
  • Millennials (25-40): 48%
  • Gen X (41-55): 35%
  • Baby Boomers (56-75): 18%

For younger consumers, BNPL offers an appealing alternative to credit cards. Many Millennials and Gen Z are wary of taking on credit card debt and are attracted to the more transparent, predictable costs of BNPL installment plans.

Interestingly though, while use is lower among older generations, they are helping fuel the growth of BNPL. The Ascent survey found that Boomers‘ use of BNPL jumped from just 6% in 2020 to 18% in 2021, a 200% increase.

Average Order Values and Purchase Categories

So what are people buying with BNPL plans? While virtually any online purchase can be made with BNPL at participating retailers, these services tend to be most popular for mid-sized purchases in the $100-$500 range.

According to data from Klarna, one of the leading BNPL providers, the average order value of a BNPL purchase is $140, compared to $82 for non-BNPL purchases. This suggests that consumers are more likely to opt for installments on slightly larger purchases that may be difficult to pay for upfront.

In terms of what people are buying, GlobalData‘s BNPL Survey found that electronics, clothing, and home furnishings are the most common purchase categories for BNPL:

  • Electronics: 43% of BNPL users
  • Clothing: 38%
  • Home Furnishings: 24%
  • Health & Beauty: 19%
  • Groceries: 10%

This shows that while BNPL is being used for everyday essentials in some cases, it‘s particularly popular for discretionary and big-ticket purchases.

Continued Growth Ahead

The stunning growth of BNPL shows no signs of slowing down. In fact, Worldpay projects that BNPL‘s share of global e-commerce transaction volume will more than double by 2024, rising from 2.1% in 2020 to 4.2%.

The factors fueling this growth will likely only strengthen in the coming years. E-commerce sales continue to grow rapidly, increasing the overall pie for BNPL services. At the same time, younger, credit-shy generations like Gen Z are gaining purchasing power and showing a strong preference for BNPL payment options.

Much of the growth will likely come from new BNPL users. A 2021 survey by Cardify found that 55% of BNPL users had signed up for their first service within just the past 12 months. As awareness of BNPL grows, more consumers are likely to try it out.

Risks and Challenges

While the growth trajectory of BNPL is undeniable, the industry also faces challenges. One key risk is the potential for consumers to become overextended by taking on too many BNPL plans. While most plans are interest-free, missed payments can result in fees and damage to credit scores.

There are also concerns about the lack of regulation in the BNPL space compared to traditional credit products. Critics argue that BNPL providers are not doing enough to ensure that consumers can truly afford the payments they are taking on.

From the merchant side, BNPL can be an attractive way to boost sales, but the fees charged by BNPL providers can eat into margins. Retailers have to weigh the benefits of offering BNPL against these costs.

The Bottom Line

Despite the risks, the data clearly shows that BNPL is a payment option that can no longer be ignored. With use cases expanding and adoption growing across demographics, BNPL has evolved from a niche offering to a mainstream payment alternative.

For retailers, offering BNPL options is increasingly becoming table stakes for staying competitive, especially with younger consumers. And for consumers, BNPL provides a flexible, transparent way to make purchases and manage cash flow without resorting to credit cards.

While the long-term trajectory remains to be seen, BNPL‘s rapid rise appears to be more than just a pandemic-driven fad. As more and more people experience the convenience of splitting their purchases into bite-sized installments, the BNPL habit will likely only get harder to break.