Buy Now, Pay Later (BNPL) was once considered a niche payment method, but by the end of 2021, the global market had reached $120 billion, with a Compound Annual Growth Rate (CAGR) of more than 85% between 2019 to 2021, quickly making it one of the most prominent payment trends in the eCommerce world.
Changes in consumer purchasing habits and the need for digital and financial innovation have driven the demand for point-of-sale financing across many industries. In this blog, we explore how merchants in the travel industry can benefit by offering BNPL financing options at the checkout to optimize growth in this competitive landscape.
The role of BNPL in a post-pandemic travel industry
In a sector that has experienced significant disruption over the last few years, predictions reveal that it will return to pre-pandemic levels by 2023 and grow at a rate that will surpass global GDP growth.
But while the pandemic is having less of an impact on travel - with research revealing that nearly three out of four Americans are now ready to travel again - there is a new threat affecting the vacation industry: the economy.
Many consumers have had to change their spending behavior to make a vacation a reality this year. A recent survey revealed that 22% of consumers had reduced their vacation budget, 21% are reducing the number of holidays they're taking this year, and 16.9% are cutting back in other areas so they can still vacation.
How can travel merchants benefit from BNPL?
With consumers clearly not willing to compromise on their vacation plans, only adapt, how can BNPL help mitigate the effects of the economy on consumer behavior but still maximize conversions at the checkout?
Higher conversion rates online & average order value
Customers now long for seamless experiences from start to finish when shopping online, with research by Klarna revealing that 28% of respondents cited a long, cumbersome checkout process as the top driver of brand disloyalty.
Most shoppers would likely avoid buying a big-ticket item online, but providing customers with the financing they need to pay over an extended period can be an important deciding factor at the checkout.
Analysis by PYMNTS also highlights that merchants who offer BNPL - particularly when the BNPL solution is white-labeled in the merchant's brand - could see cart abandonment rates decrease by nearly 40%. Giving customers a seamless experience with a multitude of omnichannel payment options can help convert customers on the fence to active buyers.
Increase your customer retention & lifetime value of customers
A positive experience is essential for customer retention. When consumers purchase from an online platform regularly and have a positive experience where all their needs are satisfied, the more likely it is consumers will start to recognize BNPL as a viable financing option. Not just for summer vacations, but short breaks and even a single night away.
FinTech Affirm found that offering BNPL payment plans helped increase their repeat purchase rate by 20% and witnessed a huge upswing in business over the last two years. The functionality and flexibility of Affirm's payment offering mean customers have welcomed them into their trusted set of merchants for online purchases.
This is particularly significant as "bleisure" travel - which combines the elements of business and leisure into one trip - is gaining popularity and expected to reach $497.5 billion in 2022, thanks to flexible work arrangements creating new opportunities for remote workers to extend their travel plans more frequently.
Capture a wider audience
The flexibility of BNPL can introduce you to customers who may have forgone a holiday due to the upfront costs involved. Instead, this financing option allows users to maximize their monthly income while securing the holiday they want. Opening the door to high-value order items to customers who can't pay upfront can still fulfill consumer desire for instant gratification.
This low-interest, often transparent payment method, compared to a credit card, can help give consumers the confidence to purchase a holiday. For indebted customers, this can also offer peace of mind that they're paying for their holiday over an extended period and on terms that suit them.
Aside from customers who use BNPL to spread the costs of holiday payments, almost 75% of BNPL users are Gen-Z and millennials, with 54% of millennials interested in using a BNPL plan for travel to avoid credit card fees and high-interest rates.
Bringing BNPL into the fold
The BNPL industry has witnessed tremendous growth over the past few years and has firmly cemented itself into the payments ecosystem as a customer-centric payment method.
The advantages of instant credit, deferred payment arrangements, and low to zero interest rates ultimately allow holidaymakers to budget and spend their money in a manner that suits their personal financial needs - especially when it comes to big-ticket items like vacations.
So for merchants, offering customers the opportunity to pay in installments will mean you're likely to benefit from higher conversion rates, customer loyalty, and the ability to attract a broader customer base as shoppers look for alternative ways to pay.
At Yapstone, we offer a BNPL solution exclusively through the leading provider, Sezzle. You will benefit from a growing, global market of consumers looking to seamlessly finance their vacations through our platform, with 0% APR options available. Contact our friendly sales representatives today to learn more about how Yapstone can give your customers the budget-friendly financing solutions they want.
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