Fierce competition between payment card brands and independent providers in buy now, pay later is expanding conversion opportunities for merchants. By layering additional services on top of existing rails, Visa, Mastercard, Discover and American Express have become global technology platforms. Similarly, independent BNPL providers first offered financing to consumers and then expanded into apps, in-app commerce, and payment card issuance.
In recent interviews, industry analysts and vendors shared their insights on how buy now, pay later has evolved into broader capabilities, improving the experience for consumers and merchants.
Embedded commerce
Iconic credit card brands share a crowded stage with cryptocurrencies, digital wallets and alternative payment systems, each with their own value proposition and target demographic. Half of U.S. consumers use alternatives to credit cards such as PayPal, Apple Pay, Venmo and Cash App, according to Miles Tullo, managing director of banking and payments at JD Power and author of his 2024 “Satisfaction study on digital wallets.”
Tullo expects digital wallet platforms such as Apple Pay Later to continue to grow through diverse product and service offerings despite uneven merchant acceptance.
“The Apple Pay Later user tends to be younger, more affluent and financially healthier than other buy now, pay later users,” he said, noting that Apple Pay Later is integrated to the Apple Wallet, providing users with single access. access multiple transaction view.
Pat Suh, senior vice president of revenue at Affirm, a BNPL provider, cited integrated commerce as a key growth driver. “Growing with our merchants is a priority for Affirm,” she said. “The majority of our volume comes from our merchant and partner integrations. We’re constantly finding and executing on opportunities to bring even more value to them, from rolling out new features and products to optimizing our integrations.
Suh said Affirm has integrated with Shopify and payment platforms such as Stripe and Amazon Pay, allowing merchants to add Affirm as a payment option with a few simple clicks. This helped Affirm reach merchants and consumers at scale, she explained.
Payment card issuance
Although most of its volume and users come from merchants and partners, Affirm is also growing its direct-to-consumer revenue through Affirm Card, which Suh described as a hybrid, combining the ease of use of physical cards with the flexibility and transparency of virtual cards.
“Our DTC business grew 51% year-over-year to $2 billion in the second quarter of fiscal 2024,” she said. “Our total volume grew 32%, four times the overall e-commerce growth rate for the period, as we continued to take market share and expand our reach. »
The Affirm card is accepted online, in-store or wherever Visa is located, Suh said. Users can request a payment plan in the app before checking out, link their bank account to pay with the Affirm Card, or use the app to request payment plans for eligible purchases after swiping or tapping.
“Affirm Card users transact much more frequently than the rest of our base,” she said. “The card increased our penetration into categories we hadn’t historically addressed, like everyday shopping and dining.”
More competition, more choice
Bryce Deeney, CEO of Equipifia BNPL provider for banks and credit unions, suggested that the Affirm card poses significant challenges for incumbent financial institutions.
“Companies like Klarna and Affirm are acquiring customers at the moment they need them for that one-time purchase, pay later by offering an alternative to a bank or credit union card,” he said. “And once the consumer is approved and downloads the app, these companies try to win the entire relationship, which poses a major threat to traditional issuers.”
Deeney noted that traders might have similar concerns. If consumers can get BNPL with the click of a button, what’s stopping them from shopping on a digital banking app rather than a merchant’s website?
Still, despite the competition, he said BNPL providers, financial institutions and merchants ultimately want the same thing: to ensure customers have a positive experience with their brands and payment products.
“As long as consumers have easy access to credit and cash flow and merchants stay top of mind with their customers, it’s a win-win world: consumers, issuing banks and merchants “, did he declare.