Pay later plans — those arrangements enabling consumers to cover purchases over a set period of time — are not only a popular way to shop; they have increasingly become a method to manage spending.
Approximately 60% of the consumers PYMNTS Intelligence recently surveyed for a new report said pay later plans help them facilitate better budgeting.
This may be one reason that roughly half of those 2,655 consumers — including those who have not yet used pay later plans — would likely switch merchants that offer installment plans tied to their existing credit cards.
The report, “Redefining Retail: Consumer Finance Trends Driving the Evolution of Pay Later Plans,” a collaboration with Splitit, examines consumer attitudes about a variety of pay later options, including buy now, pay later (BNPL) plans, general-purpose card-linked installment arrangements and plans tied to merchant and store credit cards.
But as exclusive PYMNTS Intelligence data that was not included in the final report shows, how consumers use pay later plans varies according to generational preferences.
While 27% of baby boomers and seniors, 34% of Generation X shoppers and 40% of millennials use the pay-later purchase plans primarily to buy clothing and accessories, 54% of Generation Z consumers make groceries purchases their top plan preference.
The script flips when it comes to the second most popular payment plan category: while almost half of Gen Z consumers deploy deferred payments to buy clothes and accessories, shoppers across all the other generations we surveyed pay for food purchases with the plans.
The transactions that make up the third next-popular category align more closely to perceived generational needs: baby boomers, seniors and Gen Xers use pay later plans to cover the costs of big-ticket appliance purchases, while bridge millennials use them to buy home furnishings — all of which reflects the fact that these four demographic groups are more likely to be homeowners. Millennials and Gen Z shoppers, meanwhile, used purchase plans to buy discretionary goods, suggesting their spending needs are more fluid.
Taken together, the generational spending patterns show that — increasingly — consumers of all ages are primarily using pay later plans to buy lower-priced, everyday items. This behavior goes hand-in-hand with the earlier-mentioned findings that show consumers are now treating purchase plans as a way to budget more effectively.
These trends suggest that merchants — both those who offer pay later plans and those considering it — might want to make sure their plans can be applied to lower-priced purchases. Doing so may put them in-step with how consumers now leverage pay later plans.
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