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Will Consumers Embrace Buying Now And Paying Later?

Most retailers in the home furnishings industry offer a range of financing options, but a new trend is coming into play.

Insider Intelligence forecasts that by the end of 2022, Buy Now Pay Later (BNPL) transaction value in the U.S. will grow by 77.3% to reach $75.60 billion. 

Payment value is also expected to grow by more than 75% year over year (YoY) this year and surpass $100 billion by the end of 2024.

Apple Pay is launching the option next year, and it already has competition from others Afterpay, Klarna, PayPal, and more. And that’s because younger demographics are drawn to these app-based, easy-to-use, and easy-to-manage solutions, which could continue to drive BNPL usage in the near future.

Gen Z makes up the heaviest users, with more than half (55.1%) of digital buyers in that group using a BNPL platform this year—followed by millennials, Gen X, and baby boomers.

 “As major retailers like Target and Amazon embrace BNPL, acceptance is becoming more universal—both online and in-store,” explains Jaime Toplin, senior analyst at Insider Intelligence. “At the same time, major providers like Klarna and Affirm are doubling down on apps that make it easier for customers to use BNPL. And providers continue to move into sectors like travel, letting customers use BNPL for more purchases. These factors are combined to build customer habits and, ultimately, drive spending.”

As digital buyers become more comfortable using BNPL services, Insider Intelligence predicts that the average spending per user will continue to grow at double-digit rates through 2024, and average spending in the U.S. this year will jump by 13.5% YoY to $957.46 — surpassing $1,000 next year.  

Insider Intelligence also believes the number of U.S. BNPL users will jump by 56.1% YoY this year to 79.0 million. This comes after three years of triple-digit growth — the pandemic drove digital payments growth in general. 

So what’s next? 

There will be two major milestones to watch for in 2022: More than a quarter of the US population and over one-third of U.S. digital buyers will use a BNPL service. 

Among three key players offering BNPL apps, the company expects Klarna to remain the market leader by users through 2026, followed by Afterpay and Affirm.  

“Apple Pay Later’s September launch could surge use by making BNPL readily available to millions of users on a platform native to the devices they use every day,” Toplin adds. “This access and ease of use creates strong competition for existing titans, though Apple’s lower $1,000 limit may restrict the types of purchases the service is used for. It’s likely we’ll see existing giants continue to ramp up loyalty initiatives in anticipation of the new service’s debut 

But is there a downside? 

“Though BNPL is skyrocketing, regulation looms,” Toplin says. “The Consumer Financial Protection Bureau’s recent push to caution consumers and subsequent inquiry into BNPL products could signal rule-making on the horizon. Applying new regulations could slow growth, interrupt seamless processes, and raise costs—but increased transparency could also generate trust among current customers and prospects, while putting a negative news cycle to rest.”

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