The story of buy now, pay later (BNPL) platforms is told by the headlines.
Big names in the space like Visa and PayPal have moved into the segment as BNPL arrangements have made the jump from a niche payments subtype to an increasingly mainstream option that consumers, especially younger consumers, are expecting to be offered.
And for BNPL forerunner Afterpay, that explosion of interest turned into an explosion of growth in the year 2020 that no one could have forecast. As Afterpay’s U.S. Chief Financial Officer Laura Nadler told PYMNTS, November was the firm’s largest sales month ever, bringing in over 2 billion Australian dollars ($1.5 billion) total. U.S. volume was up over 200 percent, exceeding the firm’s volume in the firm’s home base of Australia for the first time as it added over 1million new American users to the platform.
“Clearly the pandemic has accelerated our business as shoppers have gone online and shifted from credit to debit,” Nadler said. “That really plays to our strengths. So, we saw a really strong holiday season and a continuation of the great growth we’ve been seeing.”
It’s growth that Afterpay believes will keep pace as 2021 goes on, vaccines roll out and the pandemic (hopefully) fades into memory. Because although the factors that first pushed consumers inside and away from physical commerce will come to an end, Nadler said she doesn’t see them slipping back into analog behaviors once the pandemic is over.
Consumers, she said, long before the pandemic were looking for a new way to pay that gave them more control, more oversight and less credit risk. And although the road ahead for BNPL will be a more complicated one based on the influx of new players the pandemic has inspired, she said, Afterpay believes that it is looking toward a future that is shaping up to be bright.
“We see a lot of significant runway to continue to grow both given what consumers are looking for and given the performance that we can deliver for merchants,” Nadler said.
Serving The Consumer’s New Needs
Although the consumer took a hit early in the pandemic, Nadler said, Afterpay has been watching consumer spend come back all year, especially among millennials. They are, she said, particularly committed to supporting local businesses through this tough time. But although the desire to spend has come back, the reasons for using Afterpay have stayed the same.
“Our customers really prefer Afterpay because it’s a budgeting tool. And they’re not subject to upselling with interest-bearing products or getting enticed into debt and paying more than they should,” she said.
That doesn’t only make the customers happy, she said, as data definitively shows BNPL also improves conversion numbers and even increases basket size because more empowered customers are actually willing to buy more when they have a clearer image of their own limits, financially speaking, in the transaction. BNPL, she said, is the rare position of giving both sides of the transaction what they want in a way that builds up and benefits both.
“This new way of paying really empowers people to use their own money in a responsible and safe way,” Nadler said. “I think there’s an overarching trend around financial wellness and budgeting, and I think we’re going to continue to see that fuel the industry.”
It’s that fuel, she said, that is making the industry an increasingly competitive place — a fact that Afterpay celebrates.
The Path Forward
As said earlier, the BNPL market is becoming an increasingly crowded place as more and more big names in payments are stepping up to offer services and compete. And while that will mean Afterpay will be racing harder against more impressive players than it ever has, Nadler said that on the whole, the company sees this more as an opportunity than a threat.
First, she noted, competition always tends to improve industries — bringing more offerings, more innovation and more new ideas to the table. That can only benefit consumers and merchants.
Moreover, she said, Afterpay is very confident in its offering. Afterpay has been around a while, has a deep understanding of how to serve both sides of a transaction, and does it a bit differently than everyone else out there.
“We have never offered a traditional finance product,” Nadler said. “And that means that we think and act differently, and we really think of ourselves as a retail platform, not just a payment method or as a simple wallet. I think that differentiates us from some of the competition.”
That means as Afterpay sets out on the journey into 2021, it travels with optimism. No one can predict the future, but the indicators are looking favorable, and more importantly, she said, consumers worldwide are ready for the change.