We see three reasons for merchants to
consider BNPL payments. First, BNPL can
increase incremental sales, especially in
impulse-purchase product categories.
Next, they offer increased customer
touchpoints and upselling opportunities.
Finally, BNPL payments offer merchants
improved targeting opportunities for
Gen Z and millennial audiences.
We see several developments on the
horizon for BNPL. First, we expect
increased competition for users as BNPL
providers battle to capture market
growth, fueled by low user loyalty to
any given provider and the entry of
traditional banks in BNPL. We also
expect growth in in-store use cases
as providers become increasingly
omnichannel and BNPL providers
market directly to consumers. We
anticipate BNPL increasingly will be
presented as a preferred payment
method for online purchases. And
we expect added scrutiny from
regulators seeking to protect
consumers, especially for longer
loans with interest claw-back on
missed payments; a recent study
by The Ascent showed that 31% of
users made a late BNPL payment
and incurred fees as a result.
Gen Zers and millennials increasingly
are willing to pay with alternative
forms of payment beyond BNPL.
Cryptocurrency and the increasing
usage of person-to-person (P2P)
payments and mobile wallets are far
more popular with younger people
than with older generations.
Cryptocurrency has been
experiencing explosive, albeit
volatile, growth in recent years, and
has gained considerable traction
with established institutions.
According to the May 2021
Cryptocurrency Payments Report,
48% of Gen Zers and millennials
have owned or currently own
cryptocurrency. Consequently, a
growing contingent of networks, big
tech, and e-commerce merchants
is encouraging cryptocurrency as
a form of payment.
Cryptocurrency payments bring opportunity but also uncertainty. Accepting cryptocurrency at checkout could
allow merchants to capitalize on emerging trends, offering quick transactions, lower fees, strengthened
security, and a broad market, without needing to convert currency or prices based on the sale’s location.
But there are some unknowns. Merchants might suffer less direct fraud, but buyers could face more. There
is also the question of whether crypto can facilitate cross-border trade over the long term. It might be
too early to tell whether accepting crypto drives new sales and customers for business or merely
represents an alternative form of payment. It is also difficult for merchants to manage returns and
refunds of crypto purchases because blockchain transactions are irreversible. And volatility remains of
one of the biggest issues faced by buyers and sellers.
Person-to-person payments and mobile wallets are also rapidly gaining traction. Currently, there
are five major P2P players in the US, and $1.152 trillion is expected to transact annually via mobile P2P
apps by the end of 2023, according to eMarketer. By the end of 2025, 62% of Gen Z smartphone users in the
US are expected to transact via P2P payment apps.
Merchants have become increasingly amenable to P2P as a form of payment. In the US, merchant apps have
strong adoption thanks to the better shopping experience and personalized communications they allow. But
that may be changing as delivery aggregators expand their capabilities, new functionality emerges from
third-party apps, social platforms move into payments with social shopping, and select companies develop
super-apps to reposition themselves in the center of the customer’s life.
Super-apps, popular in emerging markets, are becoming more prevalent around the globe and are
positioned for growth with millennials. In the US, merchant apps typically have greater usage than
third-party super-apps in merchants’ point-of-sale transactions. So, whether a one-stop app for lifestyle
needs catches on in the US (vs., say, China) remains to be seen.
Delivery aggregators that shot to popularity during the pandemic are expanding their capabilities
significantly in the eyes of consumers. This bears watching as players reposition themselves to be in the
center of customers’ lives. Payments are the critical component in their effort to reposition and enable
activities from end-to-end in the shopping experience.
Social commerce adoption in the US is limited today, but could gain more traction as “social
literate” millennials and Gen Zers acquire more wealth. We are seeing more social media platforms moving
into payments in an effort to keep visitors on their sites.
Merchants should offer the most relevant forms of payment to attract the next generation of buyers. An
April study by PPRO showed that 44% of customers overall — 51% of millennials and 48% of Gen Zers — will
abandon a purchase if their favorite payment method isn’t available.
While P2P payments for larger merchants is still nascent, there is potential for these payment methods to
become more prevalent.
The adoption of cryptocurrency as a payment method is minimal today, but this is an area that should be
monitored for potential growth and more widespread use going forward.
Merchants should be sure they have a Gen Z and millennials payments strategy in each of their markets
globally and each channel to know which forms of payment to accept everywhere they operate. They also need
to know what partnerships to set up to ensure they have control over customer relationships. And they must
understand shoppers’ preferences — and the tactics necessary to drive those preferences — for each of