How Buy Now Pay Later Apps are Expanding their Coverage in the US Market?

Even without the Covid surge, financial crises such as inflation, job scarcity, and others boosted the need for financial help amongst consumers. However, Covid worked like a cherry on the top and boosted the popularity of lending trends such as pay later apps.

The “Buy Now Pay Later” feature generally rewards its users with financial freedom that breaks the barrier between the budget and price of any commodity. In the US market, names such as Afterpay, Quad Pay, PayPal Credit, among others are a few examples of leading Pay later apps.

As per a report published by Statista, in September 2020, 1.4 million installations of the buy now pay later apps in the USA happened. On the other hand, this number was limited to 734K in April 2020 in the USA.

The data by “The Ascent surveys of American Adults, July 2020 and March 2021” suggest that more American users have started using the buy now pay later apps in March 2021, compared to July 2020. 

Top startups in the buy now pay later finance market in the US

Currently, in the US, the pay later market is kind of revolutionizing. There are ups and downs now and then, all the time! So, finding an evergreen answer to this question might be a little difficult. But, if we take the example of the current situation, you know, pandemic, financial crisis, and stuff like that, the buy now pay later market is booming.

We aren’t saying that, the data is!

Take Klarna, the Swedish buy now pay later startup for example. Recently, in November 2020, Klarna reported that it has seen a 106% annual growth in its data of active users, and since 2015, it has served 85 million users already. The app offers its services in 17 countries along with a merchant network of over 200,000 clients, including brands such as H&M, Etsy, Macy’s, and more. With 11 million annual users by November 2020, Klarna led the Pay later market.

Moving further, we can talk about Afterpay while discussing the top pay later apps. The startup was founded in 2015, and within such a short span of time, it had reported a network of 9.9 million users by June 2020. This one of the top buy now pay later companies has dominated the Australian market and boosted its growth in the US market as well.

Impact of buy now pay later apps in the US

Data published on “The Ascent” suggests that 27.42% of users think that the BNPL services can replace their credit cards and it will most probably happen in the future. However, 34.95% of users think it might happen but they prefer keeping their credit cards anyways. Moreover, 37.63% of users are sure about choosing credit cards over BNPL services. Now, the most interesting part is, even with the option of credit cards, 43.73% of users use BNPL services more often.

The graph mentioned above gives an insight into the rapid buy now pay later growth in the US market. While in Jan 2020, the number of monthly users was limited to 962K, Sep 2020 saw a huge boost and touched a whopping user network of 1.4 million. Now, these figures prove how lockdown impacted this growth perpetually.

Top buy now pay later features that are attracting users

As the name suggests, of course, the freedom of paying later is the reason behind such an influence of buy now pay later apps in the USA market. However, even when facilities such as credit cards with better credit limits are existing, what attracts users towards these pay laters apps? Let’s have an insight into this question.

• Interest-free EMIs - Apps such as Sezzle are offering repayment features in the form of multiple EMIs. Users can make the purchase and repay the total amount in four EMIs. Moreover, if EMIs are paid on time, Sezzle does not charge any interest over them either.
• Rescheduling of payments - Sezzle also let us reschedule payments. If users are unable to make the payment due to any issue, they can always contact customer service and ask for rescheduling. However, there are certain limitations such as customers can only make up to three reschedulings on each order.
• No or light credit check - This feature offered by almost every pay later app gives security to the credit score of the user. Therefore, almost 24.73% of users consider it one of the crucial factors to avail buy now pay later facility. This data is sourced from “The Ascent”. 
• Easier to avail - Pay Later apps usually go through less verification process compared to credit cards. Therefore, availing of the pay later limit seems more convenient.

To conclude: The future of buy now pay later apps

Another data by the Sensor Tower throws a quantitative insight into the buy now pay later growth. The data suggests that in the US, buy now pay later apps saw a rapid growth in September 2020 compared to December 2019. The percentage of the growth might touch to a hike of up to 74%.

Now, this data is enough to understand the future of these apps. And, a few Finance app giants like American Express have already understood it. The leading financial organization has launched a feature called “Pay it Plan it” to make a debut in the BNPL market.

Written By

Arpit Business Development Head

He is responsible for marketing programs, brand management, and corporate sponsorships. He thrives on challenges, particularly those that expand the company’s reach. Next to work, Shadow, his dog, immensely contributes to his happiness.

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