Buy now, pay later Technology continues to thrive in 2022
The Buy Now, Pay Later (BNPL) technology continues to grow in popularity, with the payment option expected to grow 63.5% on an annual basis to reach US$5,955.5 million this year.
Buy now, pay later generally refers to point-of-sale installment loans that allow consumers to make purchases and pay for them at a later date. Its popularity is driven by younger generations like Millennials and Gen Z consumers and business owners.
“A lot of the younger generation not only expect this, but it’s just normal practice for them. Unlike before, when you know business-to-business (B2B) payments were made by check or by mail, the millennial shopper who is becoming increasingly influential in the business-to-business space expects this type of payment option,” Elias Beaino, Principal, said Tabit Vice President, La first B2B solution buy now, pay later in Canada offered at the point of sale.
A recent survey, conducted by Tabit in conjunction with research firm Angus Reid, found that business owners between the ages of 18 and 34 are twice as likely as those over the age of 35 to say they would consider “certainly” to use this type of financing solution.
Additionally, 44% of younger respondents say that BNPL’s financing solutions would make them more likely to make larger purchases for their business.
Beaino said the idea behind Tabit came after the explosive growth of the BNPL space on the consumer side. So Tabit thought the financing option would translate well on the business side.
Tabit isn’t the only company focused on popularizing BNPL payments in Canada.
Klarna, a global retail bank, payment and shopping service, launched its services in Canada last month and recently opened a new North American Product Development Center in Toronto – its first Product Technology Center outside Europe. With its launch in Canada, Canadians can now shop using Klarna’s interest-free, no-fee “Pay in 4” service, as well as its “Pay Now” option.
Canadian onboard retailers include Harry Rosen, Mejuri and Frank And Oak. The Pay in 4 service allows consumers who use Klarna at a business partner’s checkout to split their purchases into four interest-free payments every two weeks from the time of purchase.
According to Kristina Elkhazin, Head of Canada, Klarna, BNPL payments are growing in popularity because “consumers today are looking for alternatives to high interest rates and revolving credit that offer more choice, control and flexibility”.
She said that despite most Canadians owning a credit card, they are debt averse, with paying off debt the number one goal for Canadians in 2022, according to CIBC research.
BNPL allows consumers to spread out their purchases so they can pay for them in installments, allowing them to earn more money between payments. According to a study by the Financial Consumer Agency of Canada, 74% of respondents used the option for purchases over C$200.
When it comes to B2B BNPL solutions such as those offered by Tabit, the dollar threshold is a bit different. In business, the minimum will generally be around C$500 or C$1,000. According to Beaino, Tabit is capable of financing anything up to C$500,000. He said he saw a strong future for the BNPL, which continues to gain popularity.
“I think we have already seen this trend in the United States, Europe and Australia. There are examples of companies that have entered the buy now pay later B2B industry and they have grown extremely rapidly…I think it will only grow as we will be able to educate more and more our users over the next two years. ”