Conventional wisdom holds that buy now, pay later (BNPL) options are best suited to low-to-moderate income consumers, those who purchase small ticket items and can afford essentials. It may be an idea.
However, a series of recent announcements highlight the appeal of extended payments, which improve consumers’ cash flow by extending transactions over weeks or months, and are widespread even among high-income households. I’m doing it.
Cash flow management is one of the key benefits of BNPL for nearly two-thirds of users, PYMNTS Intelligence says in its special report, “New Data: Defining the New Buy Now, Pay Later Consumer.” points out. About a third of users say BNPL options help them make big purchases.
High income earners and luxury goods
We segmented the data in several ways, selectively including users who used BNPL when appropriate. One-third of high-income consumers with annual incomes of $100,000 or more said they had used BNPL. Diverging a bit further, only 5.7% of consumers in this income group adopted BNPL out of necessity. Approximately 25% said they valued BNPL among the wide range of payment options available.
Clothing and accessories was the product category that drove BNPL usage among all users, with approximately 33% of consumers paying over time. Only about 6% of individuals take advantage of installment payments for luxury goods, indicating significant room for growth.
Recent news
In December, Klarna announced partnerships with luxury retailers Neiman Marcus and Bergdorf Goodman. According to the announcement, customers of these retailers will be able to split their payments into four installments and pay interest-free using the Pay in Four option. The company’s financing options offer flexible payment plans. Full payment is due at checkout.
“This expansion will strengthen Klarna’s stronghold in the luxury sector, joining world-renowned luxury stores such as Liberty and Harrods in London,” Klarna said in a release.
Affirm says on its website that it has relationships with Jimmy Choo and Gucci, as well as Neiman Marcus and Bergdorf Goodman.
Making BNPL an option at checkout may prove to be a smart choice for luxury retailers. As reported here in November, luxury brands lost about 50 million customers in two years as shoppers sought lower prices. We would argue that BNPL is a way to make luxury goods (characterized by price increases) more palatable.
After all, inflation remains a pressure on consumers. In early December, while consumer spending remained the primary driver of US GDP growth in the third quarter, savings rates remained relatively low, providing a cash cushion to boost savings. reported that this means that the value is small. Growth in disposable income has not kept pace with growth in spending.
Even the highest earners we surveyed say they face paycheck-to-paycheck realities. About half of households with annual incomes of $100,000 or more and about one-third of households with annual incomes of $200,000 or more live within the specified salary range.
“For people making more than $200,000 a year, our data shows that recreation, personal care, and daily transactions account for about 28% of the budget.Higher-income consumers also spend more on education. We also found that higher-income consumers are more likely to say that spending on non-essential assets has a significant impact on their financial health. In other words, higher-income consumers spend more on discretionary items and therefore save money. PYMNTS Intelligence’s findings said.
All of this shows why BNPL enjoys support even from consumers with the highest salaries.
