BNPL is one of this season’s hottest holiday marketing tools
As brands look to stay competitive in a crowded holiday shopping season, promoting buy now, pay later plans is becoming one of the most popular holiday marketing trends.
Roughly $18.5 billion dollars is expected in BNPL spending this holiday season, according to Adobe’s holiday forecast, an 11.4% increase from last year. In response, brands and their fintech vendors are adding more BNPL partners and explicitly advertising financing plans on their websites, apps and in-store.
On Tuesday, JD Sports and Finish Line announced they were adding Affirm’s buy now, pay later services for in-store services on Tuesday, just in time for what the company’s svp of digital, Henry Spear, called “the Super Bowl of the holiday shopping season.” Meanwhile, on the Affirm app, users can activate exclusive time-limited deals — like $50 off a $125 Adidas purchase or $200 off a $1,000 purchase at jewelry company Brilliant Earth.
“They’re really looking at buy now, pay later as a promotional and marketing tool,” Pat Suh, svp of revenue at Affirm, said. “During the holidays, you see a ton of discounts — the noise gets a bit overwhelming. So, financing is a great way to differentiate for the retailer.”
Suh said retailers this year have been pushing 0% financing plans, a point CEO Max Levchin noted on the company’s earnings call earlier this month. It also has gained traction with longer-term financing options that go for 6 months or a year, versus a traditional pay-in-four style BNPL plan. Suh said 0% plans help customers feel like they’re getting a better deal than simply a percentage off — while the retailer makes the sale without a deeper discount cutting into its margins.
“It’s almost like stacking coupons, but you’re stacking the promotions, and consumers really view that as a differentiator,” Suh said. “If one retailer is offering 10% off, but one also provides 10% off and 0% financing, that provides an affinity for that retailer.”
Such financing plans are set to buoy the crush of Cyber Week spending with value-minded shoppers. According to a Deloitte survey released on Monday, around 29% of shoppers say they plan to use BNPL tools, up from 24% in 2023. Traditional debt, though, is still paramount. About 53% of shoppers plan to use credit cards for Cyber Week sales, up from 35% last year, Deloitte found.
“They feel the deals are good and they’re willing to take that debt and spend more than the budget maybe allows to get those deals,” Deloitte research leader Lupine Skelly said. “Whether they’re still carrying that debt in a year will be interesting to see.”
Like credit cards, BNPL products carry concerns over the way they incentivize people to spend beyond their means. While the payment plans are scheduled and the interest is fixed, they can still carry the potential for abuse if people take out too many loans across platforms or have cash flow interruptions.
But BNPL providers are quick to point out that each transaction is approved at the time of purchase, and people are cut off from incurring more spending if they miss a payment. The Financial Technology Association, a group that represents BNPL companies, pointed out its members have lower delinquency rates, around 2%, compared to traditional credit cards at around 9%.
When it comes to the holidays, Suh from Affirm said shoppers can use the tool as a way to budget without the risk of compound interest carried by credit cards. “It’s a core part of our mission that we don’t overextend credit to consumers,” she said. “With this particular transaction, you know what you’re going to pay, and you have the time frames.”
Similarly, Jinal Shah, CMO and gm of shopping at BNPL platform Zip, said people can use BNPL as a “cash flow management tool.” This is especially relevant for holiday shopping when people are indulging in more shopping than usual. Last year, the company saw a 26% bump in Black Friday purchases using Zip compared to 2022. “If overall consumer sentiment is strong, across the board retailers and partners and payment options companies like us will see increased usage.”
Shah said companies that use Zip advertise it on their websites and with in-store signage. There’s also a push from some to target lapsed customers using email marketing or re-targeting. “This is a very competitive and crowded time,” Shah said. “Everyone is competing for the same customers and eyeballs. We see a lot of our partners laying out the red carpet to their existing customers, and rightfully so.”
Splitit, a fintech company that provides white-label installment payment plans for existing credit cards, expects to see pay-later options used across demographics and incomes. Splitit CEO Nandan Sheth said the company works with merchants at least on a quarterly basis to help plan their promotions and figure out what makes sense to implement based on their products, price points and target customers.
“We have a lot of data that tells what plans are attractive for which shoppers for the holiday season, which plan, duration and what kind of plan the consumer is going to like,” he said.
Typically, that comes down to one or two choice options. One of the most successful promotions of late is repeat usage, Sheth said. That’s when a customer is buying one item on a financing plan but is offered an extended option for buying an additional item or set. “The merchants that do better at bundling or the merchants that are creative in terms of follow-up offers tend to do well.”