New • Report

Convenience, Debt, and Novelty: Analyzing BNPL Consumer Data

Wednesday, September 8, 2021 • 4:00 PM EST

Key Takeaways:

1. Klarna is growing at a faster pace than other BNPL players, increasing to 14.6x its January 2020 volume as of July 2021. This growth comes at the expense of market leader AfterPay, which has been decreasing in its share of payment volume captured.
2. Comparing per-user value for all brands, average BNPL frequency per user has maintained while spend per user has increased. Quadpay and Affirm lead the pack in value derived per user, perhaps in thanks to their partnerships with mainstream travel providers.
3. Consumers with different demographic and psychographic profiles have different expectations and behaviors towards BNPL. Three distinct customer personas have emerged: The Convenience Seekers, The Debt Avoiders, and the Novelty Lovers.
4. Comparing across the customer personas, Convenience Seekers and Debt Avoiders are more likely to be satisfied with their BNPL experience and look for additional ways to use the service. Novelty Lovers are more hesitant about continuing to use BNPL and expressed that the service is not very important to their shopping experience.

In July 2020 we covered the then-emerging trend of Buy Now, Pay Later (BNPL). Now, it’s a full-on cultural phenomenon with multi-billion dollar exits and global media coverage. To better understand the major BNPL players in September 2021, Cardify analyzed zero party spending data and surveyed more than 1,000 verified users about their BNPL motivations, behavior, and satisfaction.
Klarna is the clear winner when it comes to indexed spend growth. The platform saw a 14.6x increase from its January 2020 volume. By contrast, Quadpay and Sezzle both saw 3.4x growth, Afterpay had 2.3x growth, and Affirm had 1.8x growth from its January 2020 levels.

Klarna’s explosive growth also shows itself in wallet share. The platform more than tripled its wallet share from 8.9% in Q1 2020 to 27.2% Q3TD 2021. By contrast, market-leader Afterpay lost a significant chunk of its share of consumption, dropping from 43.2% in Q1 2020 down to a still-market-leading 35.0% in Q3TD 2021.

When it comes to average transaction frequency per platform, Quadpay and Sezzle are in the lead with the average customer incurring 4-5 transactions per month on their respective platform. Then comes Afterpay and Klarna with an average of 4 transactions per month. Affirm underperforms the competitive set, hovering at around 2 transactions per month.

Across the board, average BNPL spend per user has been increasing. Quadpay and Affirm lead the pack with an average spend of about $130 per user. Both Quadpay and Affirm have partnered with mainstream travel providers like Airbnb and Expedia, perhaps contributing to this aforementioned finding. Sezzle lags the group significantly with an average value of only roughly $80.

Despite middling results in per-customer value, Klarna’s rapid growth can be attributed to its strong customer acquisition. While user acquisition efforts for all platforms lifted during the 2020 holiday season, Klarna strongly outpaced their rate of growth at 7.0x its January 2020 baseline. Klarna continues to lead in new customer acquisition well into 2021.

The three BNPL amigos

Surveying more than 1,000 verified BNPL users, Cardify asked questions about brand recognition and platform usage. Afterpay has the highest brand recognition with 89% of respondents saying they recognized the brand. This was higher than even PayPal, which came in at 85% recognition. The lowest brand recognition was Sezzle with 37%. Afterpay also was the most used platform with 81% of respondents saying they’ve used it. That compares to 59% for Klarna, 46% for Affirm, and 25% for Sezzle.

Nearly all respondents (91%) said they used BNPL to split up payments. Digging into the reason behind why they want to split up payments, three groups emerged: The Convenience Seekers, The Debt Avoiders, and The Novelty Lovers

The Convenience Seekers

Over one third (38%) of respondents indicated they use BNPL to make checkout easier. This group of people is more middle income people with incomes between $40,000 to $80,000 (44% in this group vs. 41% in the general population) and their key goals are to pay off their mortgage (47%), save for a home (32%) and save for retirement (31%). They also skew slightly millennial, with more 25-34 year olds in this group (55% in this group vs. 52% in the general average).

Convenience Seekers typically view BNPL as similar to payment platforms and digital wallet apps, whereas the average respondent viewed BNPL as similar to payment financing. When it comes to purchase patterns, Convenience Seekers are slightly more likely to use BNPL for purchases under $10 (19% of Convenience Seekers vs. 15% among all groups), for non-refundable items (54% vs. 49%), for travel (65% vs. 58%), and on websites that appear to be less reputable (66% vs. 56%).

The Debt Avoiders

Debt Avoiders represent 35% of the overall audience and tend to skew towards people with incomes over $80,000 per year (41% in this group vs. only 36% in the general average). Debt Avoiders primarily want to pay off their mortgage (55%), save for retirement (31%), and avoid debt (31%). They also check their credit score often, with 79% saying they check at least once per month. This group also skews older, with 29% of respondents being between 35-44 years old (compared to only 22% in the general average).

When it comes to using BNPL, Debt Avoiders are more likely to view it as payment financing (45% in this group vs. 39% in the general average). They are also more likely to use BNPL for purchases over $2,000 (78% vs. 74%) and for travel (66% vs. 58%). When it comes to paying off BNPL purchases, Debt Avoiders are more likely to link their debit card (82% vs. 78% aggregate) and leverage payment reminders versus setting up auto payments.

The Novelty Lovers

Novelty Lovers make up only 18% of the overall group, but tend to skew toward having higher education, with 21% having professional degrees or higher compared to only 16% for the overall average. This community also skews male compared to the other two groups and is more likely to either be 18-24 (23% vs. 16% average) or 35-44 (27% vs. 22% average). For Novelty Lovers, BNPL is viewed more like a credit card (35% of Novelty Lovers view it as such vs. only 31% of the general average). They are also slightly more likely to pay their BNPL debts with a credit card (23% vs. 21%). 

In general, Novelty Lovers are more hesitant about BNPL. They are less likely to use it for purchases over $2,000 (70% vs. 74% average), less likely to use it for something non-refundable (44% vs. 49% average), and are more hesitant to use BNPL on any site they deem questionable (50% vs. 56% average). Further, Novelty Lovers have the lowest percentage of people (48%) who believe BNPL is an important or very important thing for retailers to offer.

Financial revolution or acqui-hire target?

The concept of paying for things in installments is not new. However, creating a technological backend and offering people credit card-like convenience without compounding interest rates and late fees could be seen as revolutionary. Whichever the direction, the data suggests that Convenience Seekers and Debt Avoiders use BNPL, like it, and are looking for more use cases. Even Novelty Lovers, who value BNPL the least of the three groups, still use it, suggesting novelty could be a gateway marketing technique for BNPL providers. 

What remains to be seen is how BNPL can become a sustainable financial model. Short term loans have typically charged high interest rates or fees (or both). BNPL delivers installment cash without any immediate revenue model. Advocates of BNPL point to Square’s acquisition of Afterpay as justification for the BNPL movement; the business model is in acquisition by financial institutions that want new customers. However, the all-stock nature of Square’s acquisition suggests the company isn’t quite sure how its new acquisition will add to the bottom line and isn’t ready to risk cash quite yet.