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Buying the Holidays Now, Paying Later

Monday, November 22, 2021 • 12:30 PM EST

market measurement product

Consumer Insights
Quantitative transaction data combined with a verified spend survey panel, find out more about the tool here

Buy Now, Pay Later (BNPL) took the consumer world by storm throughout 2020 and 2021. Businesses like Affirm, Afterpay and Klarna dominated the headlines and some analysts even pondered if BNPL would be the feared “credit-card killer”. 

Now with the holiday season fast approaching, Cardify wanted to better understand the role that the service will play in this year's festive spending. Analyzing payment card data and surveying verified BNPL users, Cardify investigated transactional trends during the pre-holiday period, consumer intent to use the service during the winter months, and potential impacts on related businesses.

Counting down to the holidays

When it comes to aggregate BNPL spend, Klarna has seen the largest increase leading into this year’s holiday season. Spend momentum is positive for almost all providers observed, with the exception being Zip which has cooled from a hot start to the year.

October’s average per-user BNPL spend is higher than September’s across both Klarna and Sezzle, suggesting that early-birds have started their holiday purchasing. Interestingly, the most dramatic month-over-month increase is observed for Zip, which is evidently struggling with customer counts but not per-user value.

All I want for Christmas is BNPL

To anticipate what this holiday shopping season will hold for the BNPL industry and partnered brands, Cardify surveyed more than 2,000 verified BNPL users about their upcoming spend intent. 

Nearly half (45.1%) of users said they will be paying for part - or all - of this year’s holiday purchases using BNPL. When asked to share the full list of payment methods they’ll be using, BNPL came in third place behind debit (65.7%) and credit cards (54.6%). Consumers would rather pay for holiday purchases using BNPL than cash (31.5%).

Among those who plan to use BNPL this holiday season (“Holiday BNPL Shoppers”), 46.6% will use BNPL for more than half (37.8%) or even all (8.6%) of their holiday purchases.

Data also suggests that users are increasingly comfortable with the service, as 51.1% of Holiday BNPL Shoppers plan to use BNPL for more of their shopping this holiday season than they did last holiday season. While 38.9% plan to use it the same amount, only a minority (10.1%) plan to use it less. 

If BNPL was not an option this holiday season, those who planned to use it said they’d resort to a debit card (51.6%), credit card (49.9%), or be forced to spend less (45.8%).

Compared to those who don’t plan to use BNPL, those who plan to use the service intend to spend more in total on seasonal expenses. 19.5% of Holiday BNPL Shoppers plan to spend more than $1,000 this year compared to 16.1% of those who don’t plan to use the service.

Holiday BNPL Shoppers are also more likely to increase their total holiday spending this year relative to the last holiday season, with 26.2% of this group planning to spend more this year compared to 21.3% of those who don’t plan to use BNPL.

A bought now, paid for later holiday season

BNPL has quickly become a ubiquitous part of the shopping journey. It’s no surprise that the volume of spend has already started to lift for the leading providers, spurred by the fast-approaching holiday season and “shop-early” campaigns. 

Those who plan to use BNPL this holiday season plan to spend more - more than last year, and more than their non-user counterparts. However, it’s not clear that they can afford this increase. When asked what they would do if BNPL was not available, a significant share of BNPL Holiday Shoppers said they would need to spend less. 

Defaults are rarely discussed in association with BNPL services, yet they are not just a fringe concern. 10.8% of all respondents indicate that they have defaulted on a BNPL payment plan in the past, and this proportion is even higher (13.9%) among those who plan to use the service this holiday season. 

Ultimately, the allure of BNPL this holiday season will be a double edged sword for providers and consumers alike. While jingle bells will ring in the short term, it’s unclear how BNPL brands and holiday-shoppers will handle walking into 2022 with a potential hangover of debt.