Are “Buy Now, Pay Later” Solutions the Real Winners of the Black Friday Sales Period?

The 2020 holiday season got off to a strong start, with Black Friday and Cyber Monday sales reporting high revenue numbers last month. But with average sales figures not quite meeting industry predictions, the real winners of the Thanksgiving holiday period may be the installment payments providers – who reported significant growth.

Data from payments solutions Afterpay and Sezzle both demonstrate substantial gains from this period last year. Afterpay reported a 30% YoY increase in basket size on Black Friday and a 24% increase on Cyber Monday; Sezzle reported that underlying merchant sales in November increased by 188.5% YoY. For Sezzle, this was the highest monthly UMS performance since the company was established.

“We expected to see strong results over the Thanksgiving holiday period, due to the acceleration of both e-commerce and the adoption of debit card usage since the onset of the pandemic,” said Nick Molnar, co-CEO of Afterpay. “What was most interesting to see was how the US specifically performed. Monthly underlying sales in the US (at $1.0b) exceeded ANZ (at $0.9b) for the first time, reflecting the increasing contribution from our fastest growing and largest region.”

E-commerce figures grew this year, as anticipated, due to the restriction of brick-and-mortar during November. But the growth wasn’t as high as many had hoped, due to shoppers opting to purchase outside of the Thanksgiving weekend period; many retailers offered an extended sales period this year and warned of potential delivery delays, prompting earlier purchases.

But installment payments were not impeded by these decisions, with consumer traffic from these solutions reaching new highs. Sezzle’s active consumer base reached 2 million for the first time (151% YoY growth), while Afterpay’s shop directory delivered consumer traffic of 1.2 million in the U.S. and 1.9 million globally (154% YoY increase).

Afterpay can be access on desktop, mobile or in-store at participating merchants.
CREDIT: Courtesy of Afterpay

“This shows that an increasing number of consumers are seeing the benefits of using Afterpay as a way to budget and enjoy a worry-free approach to spending their own money over time,” said Molnar. “As a result, our merchant partners are seeing strong business performance. Additionally, Americans are spending far less money than they normally would on experiences like travel, entertaining and dining, and so we expect them to allocate more to spend on their holiday shopping lists.”

“Buy now, pay later” budgeting tools like these have been growing in popularity among younger demographics, who may have lower discretionary income and are frequently debt-averse. As these solutions become more commonplace in the retail landscape, Molnar believes that this growth will continue – both during and outside of the holiday sale period.

For merchants, there is an opportunity to increase basket size and average order value through partnerships with payments providers. Millennial and Gen-Z consumers are increasingly choosing to reject traditional credit, in favor of spending their own money over time; roughly 90% of all global Afterpay transactions are made with a debit card. if a retailer does not offer this payment method, they may choose to shop with a competitor who does.

“Covid accelerated a strong movement already happening in the market, which is that we’re shifting from a credit to a debit-led economy,” said Molnar. “Gen Z and Millennial shoppers are showing a strong preference to pay with debit cards – instead of expensive credit cards and loans, which often lead down a rabbit hole of revolving debt and fees. As these generations mature and their spending power grows, so will the use of BNPL as a primary form of payment.”

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