Of all the trends that popped up in 2021, we can’t think of any that has affected the world of payments more than buy now pay later (BNPL). By the end of 2021, this “trend” will have generated $100 billion in sales. Picking up incredible steam throughout the pandemic, BNPL shows no sign of slowing. In fact, BNPL is set to grow 55% every year in Canada.
Over the next seven years, we can expect to see a value upwards of US$17.6 billion annually.
This kind of massive growth is something no business cannot ignore.
The time to explore BNPL and alternative payments options is now. Read on to learn what BNPL is, who uses it, and why, where EFT payments fit in, and the benefits they bring to the BNPL world.
What is BNPL?
Buy now, pay later is a financing arrangement allowing consumers to make purchases without paying for them all at once. Think of it as the new generation’s “layaway plan.” Except rather than paying upfront, consumers can defer installments to the future.
In Canada, you may have already heard of Sezzle, PayBright, Affirm, and Clearpay, among others. Consumers often come across these BNPL options when checking out eCommerce websites allowing them to choose to pay in installments. The choice of BNPL is embedded into the checkout experience. Once buyers select this option, they will be prompted to set up their repayment plan for the purchased goods.
It is important to note that not all BNPL companies are the same, and each will have its own conditions.
Who’s using Buy Now Pay Later and Why?
Businesses of all types, sizes, and markets. According to ZIP, they are seeing dozens of merchants sign up each week. BNPL helps companies address abandoned carts while meeting consumers where they are at. From Air Canada to companies like Lululemon and GameStop, businesses look to BNPL to help them sell more and add to the bottom line.
As for consumers, there is not a generation that hasn’t been touched. With credit card usage on the decline as consumers seek to avoid debt and higher interest rates, alternative payment options have skyrocketed. We have seen Gen Z’s use of BNPL increase six-fold from 6% in 2019 to 36% in 2021, while millennials’ use has more than doubled since 2019 to 41%. Not to be outdone, Gen X adoption rates have more than tripled, and even Boomers are starting to take a piece out of the BNPL pie.
Consumers are enjoying the ease and convenience of these “new” payment installments. The ability to grab what they want when they want it with no costly interest rates or late fees delivers significant appeal. The BNPL appeal is even starting to extend beyond consumers. As companies like Slope begin to emerge, it looks like B2B payments are on the horizon.
“Financial products tailored to meet the consumer where they are at, deliver a convenient, seamless, and streamlined experience. Thus removing most of the historical friction often involved.”Rhett Roberts, CEO of Loan Pro
The Benefits of Using EFT Payments for Buy Now Pay Later
Payment processing solutions become the magic behind BNPL and a crucial component. To date, most BNPL companies across North America only have debit and credit card repayments on offer. However, with the recent significant uptick in account-to-account payments, every company, including BNPL, is beginning to see the light. Across the board, organizations realize the value in offering alternative payment methods including EFT and ACH bank account payments, allowing them to capitalize on this surge in popularity and capture a broader audience.
The value of EFT account-to-account payments is on the cusp of realization in Canada. EFT payments are convenient, reliable, save money and ensure an uninterrupted repayment process. The benefits derived from verifying the account holder’s pre-transaction become significant in BNPL. Consider the savings of paying less in fees, a decrease in NSF, and a reduction in workforce resources. Not to mention, the security of A2A payments means less fraud and enhanced consumer information privacy.
✓ Reliable – Bank accounts do not expire. Credit card expiry dates cause disrupted payment flows requiring resources to chase repayments.
✓ Cost-savings – Every different card has a different cost. The transaction fees on EFT are often the least expensive option. This is key when margins are narrow. EFT helps merchants keep costs down.
✓ Customer convenience becomes an all-around win. With EFT payments, consumers do not need to update payment information and never have to worry about interest. This delivers a consistent payment cadence and provides the merchant with a much lower return level.
Optimize your BNPL online payment processing with VoPay EFT iQ11
A variety of payment methods relevant to the local market are key when it comes to selecting a payment partner for your BNPL solution. Benefit from faster transaction speeds and lower costs with our Intelligent EFT (iQ11). Our data-driven solution provides same-day EFT payment processing allowing businesses to verify essential information including ownership, availability of funds and complete visibility into the lifecycle of each transaction. Easily integrate our technology into your current solution using a single Open API.
Move BNPL payment processing into the next generation. Partner with VoPay and leverage an easy-to-implement white-label API payment solution to debit Canadian bank accounts electronically.