About a quarter of Americans earning between $ 50,000 and over $ 100,000 a year have found themselves cut off from traditional credit because of past stories, but their money keeps spending.
Giving these strong employees a second chance at credit turns into a huge retail opportunity.
What we are finding is that this massive consumer segment is making the most of Buy Now, Pay Later (BNPL) installment credit. Suppliers and merchants have found that this group not only enjoys installments but also forms an affinity for the brands and merchants who carry them.
In a PYMNTS ‘On the Agenda’ discussion, Sezzze CEO Charlie Youakim and Pom Pom at Home COO Samuel Leiaghat told PYMNTS’s Karen Webster that the more customers try installment payments, the more they liked them, setting up this subsection of the industry. For growth.
“Buy now, pay later defines a whole new payment segment,” Youakim said, referring to the growing number of second-chance consumers who are now accessing credit through BNPL.
“It’s the consumers who like some of the perks of credit, like some of the perks of debit, but it’s mixed in a way that they really like,” he said. “And what we’re seeing with this clientele, this second chance group in particular, is that they may have a credit card on their file or in their wallet somewhere, but in a lot of cases they don’t. ‘use only in an emergency. “
Noting that Shopify simplifies BNPL integration and works like store-level credit and debit card processing, Leiaghat said, “We have full confidence in buy now, pay later. This is something we have added to our site that has proven successful.
With Pom Pom at Home prices trending upwards for bedding and decor, the provision of luxury products on BNPL terms is proving popular. Indeed, Leiaghat noted that BNPL users are coming back in greater numbers.
“Between regular customer and buy customer now, pay later, we’re seeing about a 24% higher rate of difference,” he said. “Percentage, [BNPL delivers] around 9% more loyal customers. “
He added that the average installment payment for Pom Pom at Home BNPL is $ 340, and the company’s beds can range from $ 1,000 to $ 5,000 depending on specs and additions.
Get the study: How to buy now, pay later to create new opportunities for traders
The discoverability bonus
Sezzle stands out among the BNPL brands by focusing on consumers with good incomes, the ability and capacity to pay and having damaged credit. But Youakim said making more expensive items available through BNPL is a strategically smart move.
“When you start to go over $ 350, you tend to want to have longer term options that are available monthly,” he said. “When we started hearing retailers telling us about larger lines of [average order values (AOVs)], this is what added long term installments to our portfolio of offerings.
Sezzle partnered with Ally Lending, the personal loan arm of Ally Bank, in the second quarter of this year, which Youakim says allows Sezzle to offer longer repayment terms on larger amounts.
Transparency plays a role, Leiaghat noting that the customer experience of BNPL applications puts buyers at ease by presenting the transaction in an easy-to-understand way.
The discoverability aspect of BNPL is a bonus for the second chance consumer who often knows what he wants but does not have the cash on hand or the credit to buy it without credit support.
“Buy Now, Pay Later apps did a great job. [the consumer] explore other stores and find new businesses that you’ve never heard of before, ”he added. “For the online shopper, either you scroll down Instagram and something interesting pops up, but when you go to Sezzle or go buy now, pay later on a platform, you can see all these different things. that may grab your attention that you didn’t necessarily know were there.
See also: 4 things about BNPL
Second Chance Consumers Are Loyal
Leiaghat and Youakim agreed that giving customers the option to pay a second chance on credit generates a level of loyalty that transcends the dollar of any individual transaction.
According to The Second-Chance Consumer: How Buy Now, Pay Later Payments Create New Merchant Opportunities, a PYMNTS and Sezzle collaboration, 73% of this group who have used or would use BNPL agree that the option “makes me more likely to shop at retailers that offer BNPL.
“They’ve obviously been burned once in one way or another with traditional credit, and now they have this form of credit that they feel is really safe,” Youakim told Webster.
Get the study: Study confirms romantic correspondence between BNPL and “second chance consumers”
Claiming that 15% of Sezzle’s customers are “no success, no file,” he added that Sezzle offers “meritocracy within the product. If you can prove yourself, we’ll be happy to give you more.
Beyond the meritocracy of establishing creditworthiness with BNPL brands, merchants benefit from this group as they tend to generate fewer returns and require fewer services.
Leiaghat said, “We’ve seen a lower return rate with our buy now, pay later, and for us I think it’s because it’s this first product that they want to see and test. This is why our customer return rate is higher. I feel like the Buy Now, Pay Later app customer has investigated more of the product and knows what they want.
See also: The Buy Now, Pay Later battle is brewing