Do you “Buy” the Story of Buy Now, Pay Later?

Is the “buy now, pay later” system really smart, or can you expect to spend more than you can handle?

Have you online shopped recently? If so, think back to your experience on the retailer’s website.  Did you see any callouts about paying over a specific amount of time with select providers? If so, you’ve caught a glimpse into the world of ‘buy now, pay later,’ which allows people to make their payments in four installments, all interest-free. 

“Buy now, pay later” (or BNPL, for short) is continuing to dominate the financial industry, giving its users the chance to split payments equally and pay every two weeks.  Depending on which retailer you shop from, you will likely see references to either Klarna, Afterpay or Affirm, which are the “big three” names in this space.  For most people, having the option to split payments up is a relief, especially during the COVID-19 pandemic.  Some people are living off of stimulus checks, and with the financial flexibility BNPL offers, payments become a little bit easier when necessary.

Image courtesy of Klarna UK.

As great as these services seem, there are some growing concerns about the product as a whole.  CNN writes that “the option to pay later may potentially create poor incentives for shoppers because they may be more inclined to spend more than they can afford,” which is the major emerging issue with this tech (Meyersohn, 2020).  Since the payments are broken down into four smaller amounts, consumers are tempted to spend more since the initial hit to their wallets is significantly smaller.  However, all of those purchases will need to be paid off in full at a later date, which can cause debt to start accumulating.

Video breaking down the opinions on BNPL.

With BNPL becoming so popular, one question begs to be asked: how can BNPL providers re-frame their product to be messaged as a “smarter” spending option, not a reckless one? Take Klarna’s website, for example.  Right now, the ‘How it Works’ page has some good information, but a lot is left on the table for the consumer to ask about.  Are there ways to set spending limits to stick to “smarter” spending? What sorts of fees will occur if I miss payments, and how will that impact my “smarter” payment option? All of these need to be clarified for BNPL to be accepted as a trusted payment method. 

One great way to start reframing the product is to create ads and content that feature products people actually need, not want.  With the back-to-school season coming up shortly, people will need to invest in backpacks, supplies, and more.  Wouldn’t you want to encourage a responsible purchase like this instead of highlighting expensive jewelry and dresses? Timing the “smarter purchases” properly is key to jump-starting an attitudinal shift.

Another way to get users to trust BNPL is to place updated educational messaging in outlets geared towards specific demographics.  For example, if you want to make sure millennials and Gen-Zers understand how to manage their finances while paying in four payments, try placing this new content on Instagram and Snapchat, where they will be more likely to see it.  Influencers can also play a large role here, hopping on their platforms of choice and creating videos describing the product and the benefits of smart spending over time. Bretman Rock is a huge influencer in the Klarna family, and his content has always driven impressive results.  He could be ideal for the millennial/Gen-Z audience, as his followers stop to digest his content fully.

Bretman in Klarna’s holiday campaign. Image courtesy of Bretman’s Instagram.

Since the tech is fairly new, BNPL services have a responsibility to inform their publics fully and in a timely manner.  When someone downloads the Klarna or Afterpay app, they should be able to find all of the necessary resources before they venture off to the merchant sites.  If these providers take the time to care for their publics, they will see better usage and conversion rates, making everyone satisfied all around.

So, I leave it up to you: even with proper messaging and materials in your hands, would you trust a buy now, pay later provider?

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