Why BNPL is Top Choice for The Debt-Averse Generation

The last two years have seen consumers migrate to digital in greater numbers and embrace new channels and payment options. Across the payment landscape, there has been no bigger disruptor than Buy Now Pay Later (BNPL). From Klarna to AfterPay, down to Asian key players like Atome and Hoolah, BNPL has upended the payments industry globally. RFI Global’s BNPL Global tracker has been monitoring awareness and usage for brands since 2016. As we look at the shifting consumer behaviours and attitudes toward this alternative payment method, I’ll be looking at one of BNPL’s key consumer segments in greater detail.??

So, who are the debt-averse generation? RFI Global research has found that there is a sharp distinction in BNPL usage generationally, the typical BNPL user base typically skews towards the younger demographic. Across markets, Millennials are the most likely to have used a BNPL service. In fact, usage of BNPL is highest among consumers aged 25-34 in almost every market in RFI’s Global BNPL Tracker, with the exception of China, where usage is highest among the under 25 segment. Millennials have been the early adopters of this new payment method and continue to flock to it.?

Source: RFI Global, Global BNPL Tracker?

However, it would be a mistake to write off BNPL as a Millennial only product. Particularly in more mature markets, RFI Global research indicates that BNPL uptake is growing among Gen X and Baby Boomers who are keen to try the BNPL phenonoma.??

Australia, widely considered the birthplace of BNPL, provides us with a good indication of how other markets will evolve. We have seen adoption led by the Millennial segment, and to a less extent Gen Z in this market. Over time, however, usage has increased among older customers also. Over the last 12 months BNPL usage in Australia increased across every age group except 65+. As BNPL continues to expand, and in particular as the types of merchants and industries accepting BNPL expands, we can expect that usage will also grow among older customers.??

Emerging BNPL markets are likely to experience a similar trend, with young customers leading in terms of adoption but being followed by older generations.?

Key Drivers of Usage

Globally, key drivers to using BNPL include being a more convenient way to pay, avoidance of interest and, importantly, that BNPL helps customers to budget. That BNPL helps customers to feel more in control of their spending and better able to manage their money is key to BNPL’s success among younger consumers.??

Again, looking at Australia, younger BNPL users are encouraged to use BNPL for a range of reasons, with budgeting ranked first. Meanwhile, the proportion of BNPL users who indicate they used BNPL as no interest was charged increases with age. 24% of BNPL users under 35 say they used BNPL because no interest was charged, increasing to close to 50% of BNPL users aged 55 and over. ?

Source: RFI GLobal, Global BNPL Tracker?

RFI Global research in the UK also shows that a key driver of BNPL usage is that it helps users to budget and manage their cashflow. This attribute appears to appeal to younger consumers who are less confident managing their money and are less experienced when it comes to repaying credit. Furthermore, our research in the UK also indicates that BNPL users see BNPL as a more ‘responsible’ way to fund purchases compared to a credit card.??

We can expect that BNPL will continue to be a compelling proposition for younger demographics, providing them with the financial flexibility to fund their purchases and offering them more control over their cash flow and budget. It is also important to note that these younger customers are typically unfamiliar with traditional credit products and this is likely a reason why BNPL is so appealing. It allows them to access credit in a way that feels safer and dip their toes into the water.?

As younger consumers continue to drive the adoption of BNPL across markets, traditional providers will need to come to terms with the fact that BNPL will increasingly be the first credit product that these customers use. This will impact customer expectations of other credit products, in particular credit cards. Entry-level credit card propositions will likely need to adapt to meet this changing need and expectation. ?

Although younger consumers have been the early flag bearers for BNPL, future growth will depend on the increasing adoption among older consumers. We are already seeing this in our findings as RFI Global’s latest research unveils that older consumers are turning to BNPL in growing numbers.?

?In our latest report: The Global State of BNPL: How Banks and Providers Can Champion and Leverage Customer Interest to Succeed we explore more on this topic, including key drivers of usage globally, merchant benefits of BNPL acceptance and much more. Download it now and discover further insights and future predictions and recommendations.?

?