‘Buy Now, Pay Later’ gains traction in the US amid fierce competition

Retailers scrambling for new ways to keep and attract new customers, particularly young ones, are introducing “Buy Now, Pay Later” schemes.

According to the Wall Street Journal, Macy’s, Gap, and Neiman Marcus have all introduced the rather old-fashioned concept of spreading payments to make purchases more widely accessible to the less-affluent customer, ones who may already have maxed out their credit cards, or not have one at all. 

The details

• The plans come at a cost for the stores who lose out on fees from credit cards carrying their name, plus they have to pay hefty fees to fintech companies that offer the buy now, pay later plans, such as Klarna Bank, Affirm Holdings, and Afterpay. In addition, they lose out from income generated by customers who roll over debt on their store cards. 
• It’s hoped that costs will be outweighed by the income from attracting new custom following the devastating economic effects of the pandemic. Macy’s CEO Jeff Gennette says 40% of shoppers using Klarna are new to the store, and 45% are aged under 40 – only slightly more than 25% of Macy’s existing shoppers are below 40.
• Around 20% of millennials used buy now, pay later last year. The payment method is forecast to grow to 4.5% of North American e-commerce payments by 2024, according to Worldpay.

Key Quote

“Customers, particularly younger ones, were asking for a buy now, pay later option. If we didn’t have it, they might have gone elsewhere” – Macy’s CEO Jeff Gennette.

Sourced from the Wall Street Journal