Buy Now, Pay Later Is like Layaway but Better
Layaway used to be the king of financing. Introduced in the 1930s, it was how consumers bought things they couldn’t afford. Then the credit card showed up and today layaway is nearly an extinct concept.
The downside to layaway was that you couldn’t have the merchandise until it was paid in full. Credit cards solved that issue, but that convenience cost you interest.
The problem with credit cards
Not everyone wants or is eligible for a credit card and the extinction of layaway cut off financing to a whole segment of consumers. Some estimate this group makes up one-third of all shoppers. Making things worse is millennials are weary of carrying debt, which means fewer of them are interested in credit cards.
Instead, younger consumers are turning to buy now, pay later (BNPL). Between April and September 2020, installs of BNPL apps doubled. More than one-third of U.S. consumers have used BNPL, including 40% of millennials and 57% of Gen Xers.
What is buy now, pay later (BNPL)?
BNPL bridges the gap between credit cards and layaway. Shoppers get their purchase right away, but the bill is split into four equal, interest-free payments over 6 weeks online and in-store.
Discover Four Major Benefits of BNPL
1. Retailers get paid in full, we handle the rest.
With BNPL, retailers get the entire payment upfront. We manage the payments and assume all the risk. This is a significant advantage over traditional layaway, where merchants only received a down payment and had to manage the whole process.
2. BNPL helps boost sales
Customers love BNPL because they get the benefits of layaway, but receive their merchandise just like they had paid for it in full. This feature attracts a whole new demographic of shoppers who want financing but don’t have or want a credit card.
3. It’s an incentive to spend more
Layaway was usually reserved for big-ticket items like furniture, jewelry and electronics. BNPL can be used for purchases as low as $35. And since consumers get more buying power by splitting up the payments, Zip merchants have seen a 60% boost in average order value after adding BNPL.
4. A happy customer is a returning customer
Customers say they’re 40% more likely to complete their purchase if BNPL is offered. At Zip, we’ve seen that implementing BNPL increases the repeat customer rate for our merchants by as much as 80%. Our merchants also enjoy significant increases in conversion and topline sales.