customer signing form for financing
  • “Point of sale financing has historically been reserved for large purchases like luxury electronics, but now we are seeing an uptick in consumers using installment plans for smaller purchases across large and small retailers.”
  • Inflation and rising costs of goods and services are pushing shoppers to rethink how they are spending and using traditional credit.
  • A complete, embedded finance solution creates the opportunity for brands to build new product categories — like subscriptions and bundles.

More than one-third of consumers (37%) have already or plan to use Buy Now Pay Later (BNPL) loans for their back-to-school purchases, according to new research from TransUnion’s Back-to-School Shopping Report. BNPL loans allow shoppers to make purchases with deferred or no interest installment loans.

TransUnion’s analysis found that 55 percent of consumers expect to spend more on their back-to-school shopping this year, with inflation driving the increase. Shoppers also plan on making other adjustments in response to inflation, such as buying fewer and cheaper items. Shifts in spending were more pronounced among students shopping for themselves, compared to parents shopping for their children. 

BNPL is the New Credit Card

“The explosion in BNPL growth revealed a seismic shift in how point of sale credit is used,” Gaurav Sethi, Chief Strategy and Product Officer for Citizens Pay, said. “Point of sale financing has historically been reserved for large purchases like luxury electronics, but now we are seeing an uptick in consumers using installment plans for smaller purchases across large and small retailers, as POS financing becomes easier to use and more commonplace.”

Additionally, inflation and rising costs of goods and services are pushing shoppers to rethink how they are spending and using traditional credit. Citizens Pay is seeing more customers beginning to use BNPL and installments in place of credit cards. For many, especially younger generations, credit cards are a source of anxiety and people fear gaining debt they cannot pay back. They see BNPL as a way to ensure they can pay off a loan, as it offers more clarity over the amount of debt and the repayment schedule for the item they purchase. 

Create More Personalized Experiences with BNPL

Custom BNPL options are ideal for retailers who are looking for deeper relationships and loyalty with their customers, in order to drive incremental sales, according to Sethi. A complete, embedded finance solution creates the opportunity for brands to build new product categories — like subscriptions and bundles — and provides support from lenders with the data, experience, and stability to serve them and their customers through various economic cycles. 

Banks are already in the business of consumer financing and are equipped to help retailers create bespoke solutions. Banks are also well-positioned for increased regulation with diverse product sets and rigorous underwriting standards that have stood the test of time. Sethi says that implementing a custom-built BNPL solution is something that is affordable for retailers of all sizes — simply work with the bank to get what you need. 

Gaining Popularity Even Into 2023

Sethi sees continued growth for BNPL in the coming years as more retail players enter the game, but especially as consumers look for more budget-friendly, transparent, and predictable options to make purchases other than credit cards. Inflation and rising prices are forcing shoppers to be more careful about their spending and how much interest they are paying with traditional credit cards. Young customers in particular feel the most strain from increasing prices, and they are moving toward BNPL solutions in the largest numbers.

“In addition to BNPL continuing to be popular for consumers, I believe retailers will begin to turn their focus away from fintechs to banks and financial institutions to meet their BNPL needs with more sophisticated offerings,” Sethi said. “Bank-run BNPL providers are often already in the business of consumer financing and are well-positioned for increased regulation with diverse product sets and rigorous underwriting standards that have stood the test of time. They can also help merchants build custom solutions for their business that go beyond an option at checkout to meet the flexible financing needs of their customers.”



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