U.S. retail customers are adopting buy now, pay later (BNPL) options for in-store transactions, according to Zip.
On a call with analysts Monday (Aug. 26) discussing the Australia-based FinTech company’s fourth quarter fiscal 2024 financial results, CEO Cynthia Scott spoke to this shift.
“Our Americas business had an outstanding year,” Scott said. “…Higher margin channels, including the physical card, saw strong in-store engagement, with card volumes up nearly 150% versus the prior year and in-store volume now driving 20% of all U.S. TTV [total transaction value].”
Overall, the Americas business saw TTV increase 39.5% year over year and revenue rise 45.6%, spurred by “deepening customer engagement,” per Scott.
Indeed, many consumers want the option to pay in stores with BNPL. The report “Tracking the Digital Payments Takeover: What BNPL Needs to Win Wider Adoption,” a PYMNTS Intelligence and AWS collaboration, found that 1 in 3 shoppers want more BNPL availability in brick-and-mortar establishments. Further PYMNTS Intelligence research indicates that BNPL is only available in stores about half as often as online.
As Zip looks to further grow BNPL adoption, it is reportedly considering partnering with Apple to integrate its installment payment capabilities in the U.S. Furthermore, the firm aims to announce deals with more merchants in the country in the near future.
Another theme highlighted by Scott was the company’s focus on being a “responsible lender.” This emphasis aligns with a broader trend in consumer behavior where trust and transparency have become paramount, a shift particularly significant in the BNPL sector, which has faced criticism over potential risks associated with easy access to credit.
PYMNTS Intelligence research finds that, among consumers who have used short-term credit, 53% say trust is an important factor when picking a lender.
This focus similarly aligns with Zip’s push to highlight its values around sustainability and ethics. Scott highlighted initiatives around gender balance in the workplace, around corporate sustainability and around “financial wellbeing and inclusion,” saying of the lattermost that its new financial literacy hub has yielded “very positive” responses from consumers.
The company’s initiatives in these areas come as a growing segment of consumers prioritize ethical considerations when making purchasing decisions. In fact, according to PYMNTS Intelligence data, younger generations are considerably more likely than their older counterparts to seek merchants whose values align with their own. The “Generation Zillennial” study revealed that 43% of zillennials — the micro-generation born between 1991 and 1999 — said that it was very or extremely important to them when choosing a merchant that the merchant offers sustainable brands or products. In contrast, only 31% of consumers overall said the same. Plus, 33% of zillennials say it is very important that the merchant’s social values align with theirs, versus 24% of the whole sample.
Meeting the needs of these consumers is especially key considering that they tend to disproportionately make up BNPL providers’ customer bases. Thirty-three percent of zillennials find pay later options very or extremely important when choosing a merchant compared to 20% of the population overall. Consequently, as Zip continues to prioritize customer engagement and financial wellbeing, it stands to strengthen its foothold in the competitive BNPL market.
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