The generational shift bringing about the migration from credit cards toward alternative payment methods in the retail sector is already transforming consumer buying patterns and merchants need to get ahead of the curve. This is according to Deko, the multi-lender Buy Now Pay Later (BNPL) platform.
A recent survey found that less than half of Gen Z consumers have a credit card representing a huge demographic change when compared to older age groups. 61 per cent of Millennials, 65 per cent of Gen X, and 81 per cent of Baby Boomers are all reported to carry at least one card. The same research also highlighted one other key difference, amongst Gen Z consumers that do use a credit card, 53 per cent pay off the total balance every month.
The decline in credit card use, however, is not being mirrored by a reduced level of credit-driven buying, quite the opposite as younger consumers are turning to BNPL who value its flexibility. Adoption rates among Gen Z are expected to increase from 36.8 per cent in 2021 to 47.4 per cent in 2025.
Melanie Vala, Chief Commercial Officer, Deko said, “this increased uptake for BNPL is unsurprising considering the flexibility and convenience of BNPL finance solutions. The Gen Z and the Future of Retail report also indicated that this demographic cohort wants the process to be as streamlined as possible.”
BNPL gives many customers access to products they otherwise wouldn’t be able to afford upfront. Unlike traditional forms of credit, applications for finance through BNPL products are interactive and make for a more streamlined shopping experience.
Melanie said, “retailers can capitalise on shifting consumer needs by partnering with BNPL providers - particularly those that offer UX-friendly application forms. Best-of-class forms use simple language, plus prompt consumers throughout so that the capture of personal, residential, and employment data is a quick and accurate process. This helps you maintain an excellent customer journey whilst also alleviating the financial burden of paying for purchases upfront.”
Attracting potential customers to your store is a key priority for all retailers and BNPL can help as customers will seek out those stores that offer their preferred payment options. However, merchants must also simultaneously improve their conversion rate if they want to see a significant impact on sales. Cart abandonment is one of the biggest challenges facing merchants right now, with the current rate across all industries sitting at around 70 per cent.
Providing flexible payment options that meet your customer needs regarding convenience will help address this challenge. This is because the ability to split the cost of purchases over an agreed period empowers your customers with more financial confidence, reducing hesitancy and drop-off before checkout.
Melanie added, “offering more flexibility and convenience to your shoppers with BNPL options is unique in that it helps you attract more customers whilst also lowering basket abandonment rates. So, it’s no surprise that buy now pay later has become invaluable for many merchants in today’s macroeconomic environment.
“Millennials and Generation Z have a huge impact on the retail sphere and account for much of the global consumer market. By providing options like buy now pay later, merchants are not only protecting themselves against competitive pressure but can also capitalise on the younger generations' ever-increasing buying potential and set themselves up for lasting commercial success.”