By FintechOS · November 24, 2021
7 minute read

Buy Now, Pay Later is a big deal for Black Friday and Cyber Monday

Find out why BNPL will play a huge role in the annual shopping event and what banks can learn from retailers  

Key takeaways: 

  • BNPL is set to become increasingly popular this year as shoppers seek to spread the cost of purchases 
  • The rise of BNPL is allowing new players to enter the retail lending market, posing a challenge to incumbents  
  • Banks can now use FintechOS to roll out their own Buy Now Pay Later (BNPL) solutions in days, not months 

It’s approaching the most wonderful time of year for retail – and also for retail lending. The holiday season starts in earnest on Black Friday and Cyber Monday, when stores launch sales and consumers rush to pick up purchases at knock-down prices. This year, the trend that will define both of these celebrations of shopping is Buy Now, Pay Later (BNPL).  

Today, more and more consumers are using BNPL to spread the cost of purchases, allowing them to buy expensive products that would be simply unaffordable without access to retail lending services. Predictions suggest Black Friday and Cyber Monday will see an epic explosion of spending this year, with Adobe predicting that online sales will hit $36 billion, a 5% year-on-year increase. Most of this spending will happen online, with one survey showing that almost half of US consumers will buy products from online retailers on Black Friday this year. It’s likely that a large and growing proportion of these purchases will use BNPL.  

Customers like BNPL because it is often interest-free, allowing them to spread the cost of purchases over several months or even years. Retailers like it due to its tendency to encourage larger purchases. It is also convenient, offering a full lending journey embedded in the point of sale. Consumers are now coming to expect BNPL, meaning that if your business doesn’t offer this form of retail lending on Black Friday, there could be dark clouds on the horizon due to lost sales.   

The Rise of Buy Now, Pay Later 

This year’s shopping season is likely to see a huge rise in the use of BNPL – a prediction that even the most cautious observer would feel safe to make after looking at some of the numbers around this trend.  

Americans will spend an estimated $100 billion using BNPL during 2021 – more than four times the $24 billion spent in 2020 – whilst in the UK it will account for £37 billion of spending.

Earlier this year, Juniper Research found that BNPL services that are “integrated within eCommerce checkout options, including fixed instalment plans and flexible credit accounts” will drive $995 billion of spending globally by 2026, up from $266 billion in 2021. 

“This 274% growth will be fuelled by a greater appetite from users for credit to spread costs, particularly in the wake of the pandemic, which has put extreme pressure on user finances,” it wrote.  

All age groups are using the option to pay in instalments, with 36% of Generation Z using BNPL in 2021 compared to just 6% in 2019, according to Cornerstone Advisers. Millennials doubled their use of BNPL in the same time period from 17% to 41%, whilst Baby Boomers’ usage grew from 1% to 18%. 

When shoppers get to the checkout, they are not likely more likely to make a purchase but to spend more money. RBC Capital Markets has estimated that retailers that offer a BNPL option will enjoy a conversion rate uplift of between 20% to 30%, as well as an increase in the ticket size of between 30% and 50%.  

Retailers are all racing to get involved in BNPL as consumers come to expect lending solutions to be embedded right inside the checkout, offering seamless access to lending that incorporates everything from KYC to affordability checks in one end-to-end journey. Amazon has partnered with BNPL provider Affirm in August to offer “pay-over-time” on purchases over $50. Walmart and Target also teamed up with Affirm – and they are not alone. Mastercard is preparing to launch a product called Instalments next year, whilst Apple and Goldman Sachs are collaborating on Apple Pay Later. Fintech challengers are also getting involved, with Curve, Monzo and Revolut all launching into the market.  

Don’t Go Into The Red On Black Friday  

Last year, the use of BNPL on Black Friday more than doubled between 2019 and 2020, the payment services provider Mollie revealed. The average value of these transactions was 25% higher than transactions which used other payment methods, once again showing that BNPL enables bigger purchases. All this data should illustrate a clear point: if retailers don’t have a BNPL solution up and running in time for Black Friday, they will sigh now and face pain later as their competitors race ahead. But that’s not all. If the technology is not robust enough to cope with the huge web traffic caused by Black Friday and Cyber Monday, businesses have a problem. Their BNPL platform should also be easy to maintain so that it can be fixed quickly on a self-service basis if something goes wrong at this critical time.  

Last year, websites taking part in Black Friday saw a 60% increase in traffic, causing 48 big names to buckle under the stress. Outages cause an immediate drop in sales, but also a long-term reputational dent. If you lose customers to a rival on one occasion, they may never come back. Businesses can’t afford to get it wrong on Black Friday, because the after-effects of friction and failure will come back to haunt them for a long time to come.  

The Future of BNPL 

You may think it’s too late to create a BNPL solution running in time for Black Friday – but we’d challenge that assumption. FintechOS lets banks, insurers and financial institutions roll out seamless customer-centric journeys at speed. We We expanded support for BNPL use cases as part of FintechOS 22. BNPL as part of FintechOS 22, the latest version of our paradigm-shifting platform. It combines composable digital and core business blocks with a no-code/low-code approach that is underpinned by cloud-native, data-at-the-core architecture.  

FintechOS already allows institutions to modernize legacy systems and launch new, differentiated digital products fast enough to cope with a deadline like, say, one of the biggest customer events of the year. Our self-service high productivity financial infrastructure platform makes it easier for internal teams to launch digital projects without needing to draw on significant resources. 

So whether your bank is involved in Black Friday – or not – there are lessons to be drawn from its success. Firstly, it emphasizes that BNPL is a big deal that’s not going away any time soon. It is part of a wider move towards embedded finance that is blurring the lines between providers as well as players from different industries. Financial services providers need to be able to meet this demand quickly and efficiently by building the right products at the right times and at the right speed.  

BNPL now, not later 

The time for banks to introduce BNPL is now. McKinsey has warned that “fintechs have taken the lead” in this space “to the point of diverting $8 billion to $10 billion in annual revenues away from banks”.  

“In our view, only a few banks are responding fast enough and boldly enough to compete,” it continued. “Banks that underestimate the threat may see continued loss in share and could lose out on participating in a growing value pool and gaining share among younger and new-to-credit customers.” 

One survey suggested almost half of shoppers regretted purchases made on Black Friday. We think that banks might have the same feeling if they lose out on a vast new revenue stream.  

To find out how FintechOS can help you roll out BNPL solutions, book a demo. 

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