Next Generation Spending: Why BNPL is here to stay
Having seen the impact of the 2008 global financial crisis on their parents’ generation, millennials became more averse to financial risk, which led to a shift from credit to debit payments.
Fast forward to 2020, as COVID-19 hit, this trend was exacerbated further with a strong move toward e-commerce. As debit payments become more popular with Millennials and Gen Z, so has the use of buy now, pay later (BNPL).
With younger generations wanting to spend responsibly and manage their finances smartly, without incurring unnecessary fees or the risk of falling into a revolving debt trap, BNPL has provided a solution. Since January 2020, BNPL spend has grown by 315%, compared to a 4% increase in credit and debit card purchases.
Average order values online at Clearpay are around £65 – and customers use our platform to help spread the payment of everyday purchases at no extra cost provided that instalments are paid on time. For merchants, BNPL offers flexible payment solutions for their customers and guarantees upfront payment – crucial for businesses with tight margins.
Clearpay was born from a deep understanding around changing attitudes to debt. We are transforming the way people pay for goods by allowing customers to pay in four instalments, over a six-week period. The service is free for customers who pay on time and late charges are capped.
Our mission has always been about powering an economy where everyone wins. Enabling consumers to access interest-free, short-term credit through digital means, giving customers better (and fairer) access to credit in a way that allows them to manage their cash flow. Clearpay allows more control over budget and borrowing flexibility that we know consumers desire and our data shows that since signing up to Clearpay, one in five users have stopped using credit cards, and another two thirds have reduced credit card use overall.
Our business model is the reverse of traditional credit - we generate revenue through merchant fees rather than consumers, creating a win-win for consumers and merchants alike. According to a recent Accenture Report, Clearpay generated £739 million in incremental sales for UK merchants in 2021 and £403 million in net economic benefits. For small-medium sized businesses, BNPL services can make all the difference, with £4 of every £5 spent being new revenue. Coupled with the fact that Clearpay has saved consumers up to £28 million in credit card fees, it’s no surprise that we have 2 million active users in the UK and we’re a favourite with more than 6,000 merchants.
We protect consumers by incorporating safeguards into our product such as first-time limits, capped late fees and paused payments to prevent customers from accruing debt. We do not conduct external credit checks or report to credit bureaus, so customer credit scores are not negatively impacted through our service.
Overall, the desire for BNPL is clear – and with 10% of all e-commerce spending expected to be through BNPL by 2024 – whether you use it or not, BNPL is here to stay as consumers and merchants push for more flexibility when it comes to payment options.
Rich Bayer, UK Country Manager at Clearpay