Many consumers and merchants have embraced Buy Now, Pay Later (BNPL) solutions. For merchants, the opportunity to boost their basket sizes, increase total transaction volume, and access a broader demographic base has been a boon. Consumers view it as a way of purchasing big ticket items while avoiding the burden of high-interest credit card debt. This broad appeal has buoyed BNPL to nearly $10 billion in transaction volume.
BNPL providers like Affirm, Sezzle, Afterpay, and others have grown in prominence and transaction volume over the past year, but many of them are established players. Clint Cady, Partner at W. Capra Consulting Group, said, “These companies have been around for some time. They just made a huge boom during the pandemic during the major shift from in-store to online. The ability to pay online and over time has gotten a lot of people’s attention.”
Tim Radway, Director of Finance & Operations at W. Capra, recently purchased an exercise bike using a BNPL provider. “It was a great experience,” Radway said. “I’ve really enjoyed paying for the bike over time with no interest. Because I’m still paying for it, the small monthly amount I pay almost feels like a fitness membership. It’s like a reminder to keep using it.”
Like Radway, many consumers have had positive experiences with BNPL programs. However, BNPL default rates are approaching 34%, which has led to some regulatory scrutiny. Cady weighed in: “I don’t think we’ll see regulation immediately. Most consumers are having a pretty good experience. But with consumer protections regulators like CFPB and others taking a closer look at BNPL, you should vet any BNPL provider you consider partnering with.”
There are other reasons to be cautious when considering a BNPL solution. BNPL programs are known for charging consumers 0% interest, shifting the program cost onto the merchant. This cost transfer can have an impact on customer acquisition and a merchant’s cost of acceptance. Cady cautioned merchants, “Carefully evaluate any BNPL solution you consider implementing. BNPL should be an arrow in your payments quiver, but it has a cost. As with any other payment method, it’s important to evaluate BNPL providers based on their potential impact on your cost of acceptance.”
Consulting a trusted third-party with knowledge of providers, their costs, and regulatory trends is a good place to start when evaluating any potential payments partner. Cady said, “W. Capra has helped a number of merchants evaluate the value of a BNPL implementation. We know that having a trusted partner to help break down costs and highlight regulatory trends is critical to choosing and implementing the right BNPL solution for a merchant.”
Clint Cady is dedicated to helping W. Capra clients to enhance their consumer payment options and successfully implement payment operations solutions. For further discussion, contact Clint at [email protected].
 US Payments Forum, “Open Forum Discussion: BNPL”, November 2021
 Consumer Financial Protection Bureau