Amazon broke records for sales and consumer savings during its annual Prime Day event, held July 11-12.according to change to gasolineAmazon reported that more than 375 million items were sold globally during Prime Day this year. Many shoppers use the buy now pay later (BNPL) option, accounting for 6.5% of all orders. In other words, BNPL alone paid for 24 million Prime Day orders. Compared to Prime Day 2022, usage of BNPL has increased by 20%.
The news came as no surprise. The BNPL market is accelerating and showing no signs of slowing down. The BNPL market is valued at $87.2 billion in 2020 and will grow 43% to $125.1 billion in 2021. Growth continues until 2022, reaching $179.5 billion, and is expected to continue growing to more than $531.5 billion by 2025.
BNPL’s explosive growth can be attributed to its growing presence at the checkouts of major shopping sites like Amazon, Best Buy, Saks Fifth Avenue, Walmart, etc. Additionally, merchants that accept PayPal can also support their in-house BNPL solution.
BNPL appeals to consumers because it’s an easy way to get what you want Now. Gone are the days of patiently accumulating a paycheck to make a big purchase. Throw in an irresistible Prime Day sale and you’ve got a recipe for a BNPL sprint. Are consumers spending more than they can afford? money under 30 It’s best said: “Buy now, pay later apps are luring thousands, if not millions, of consumers into buying things they couldn’t actually afford.”
TransUnion The study found that consumers who use BNPL are more likely to be in debt distress than those who do not. Some BNPL users, already facing financial stability challenges, are now faced with payment options that make their financial situation worse.TransUnion report 20% of BNPL users ended up with over 50% more credit card debt. Instead of helping consumers get out of debt, BNPL will put them in more debt.
BNPL may lower a consumer’s credit score. Since consumers can obtain multiple consecutive BNPL microloans at different providers, they can accumulate large amounts of debt and risk defaulting on payments if not managed carefully. Although some BNPL participants do not charge late fees, consumers may not realize that missed payments can still show up on their credit reports. Missed BNPL payments show up in hard credit checks when consumers apply for home mortgages or refinance student loans.
There are several ways that BNPL providers can help clients make better financial decisions and manage debt.Klarna Partnership Partnering with Money Advisor Network (MAN) to provide cash-strapped clients with free financial advice on how to deal with debt. Klarna’s Director of Global Policy and Government Relations said: “We are proud to be the first BNPL service to partner with MAN to provide clients with a simplified route to debt advice and call on other BNPL providers to join us in providing the same advice and support.”
The move by Klarna comes in response to the UK’s new consumer tax rules, which set higher and clearer standards for consumer protection for payments companies, requiring them to put consumers’ needs first. The United States should follow in the footsteps of the United Kingdom and strengthen regulation of the BNPL market to ensure that consumers in the country are well informed, protected, and use BNPL services responsibly.