Going Mainstream will mark BNPL’s second act

When Sezzle and Target announced their three-year contract this month, it wasn’t a simple reconciliation. It was a defining moment for the burgeoning installment payment industry.

In fact, the president and co-founder of Sezzle Paul Paradis Told PYMNTS, Target is the first among the top 10 retailers in the United States to offer a “pay in 4“, and the partnership marks the breaking of an important barrier and shows how much buy now, pay later (BNPL) has come to the US market.

“BNPL has been fairly localized in fashion and beauty, but Target is a mass retailer selling just about everything under the sun,” Paradis said. “So I really think that indicates BNPL is going to become more ubiquitous in retail. “

In recent years, a wave of new payment solutions has emerged, all united by the emerging consumer demand for faster, easier to use, mobile-friendly and flexible payments, he said.

“If you can provide all of these and the solution looks great, you will generate consumer demand,” he said.

The changing customer

The evolution of large-scale distribution towards BNPL offers did not come out of nowhere; this is a direct result of increasing consumer use in the market, Paradis said. BNPL has been a little slower to establish itself in the US market than in other global markets. He found his first real entry with consumers who were otherwise excluded from credit markets because they had no credit or bad credit. BNPL was a tool that allowed them to access the market that they probably would not have had otherwise.

But over the past four years that has changed, he said. Consumers are increasingly using Sezzle, not because it’s their only choice, but because they want to.

“Most of our consumers viewed Sezzle as a great tool for budgeting for online purchases,” he said. “We are recently seeing a significant shift towards a more mainstream consumer audience. Most of our users have a credit card but use it as an emergency tool… for large or unexpected purchases, not their preferred method of payment. And they are looking for a better alternative.

BNPL is better for a growing number of consumers, and the future of the segment lies in creating new features that make the offering more attractive, he said. Sezzle began allowing clients to use his service to establish their credit scores through the Sezzle Up functionality – something about a quarter of Sezzle users actually do. But the potential options are much broader.

What’s next for BNPL

The bigger future is where BNPL can grow. In the short term, Paradis said he expects BNPL’s offerings to be more common among mass retailers and spread to new categories that have been slower to adopt them.

Although the pandemic has pushed it to become a largely online method, he said he believes bringing BNPL to a more omnichannel context would likely be a push that will intensify over the next year. .

But the biggest change he said he expects is that offerings will get richer as rewards programs get more sophisticated to foster repeat use and build customer loyalty. This will likely go hand in hand with BNPL players trying to create more personalization and more shopping functionality “so that we can become the place where more customers start their buying journey”.

The space will also become increasingly crowded as traditional banking players are increasingly drawn into the segment, he said, noting that they have so far failed in this market but are not going. stay on the sidelines and watch the segment grow without them forever.

“They’re good for loans, but they haven’t been good at providing a truly seamless and easy-to-use digital experience,” said Paradis. “I like to think of BNPL as being at the crossroads of commerce and financial services, so I would consider innovations in these two sectors as a guide to the innovations you will see within BNPL as a category.



About the study: The AI ​​In Focus: The Bank Technology Roadmap is a research and interview report examining how banks are using artificial intelligence and other advanced IT systems to improve credit risk management and other aspects of their operations. The Playbook is based on a survey of 100 banking executives and is part of a larger series assessing the potential of AI in finance, healthcare and others.

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