Gen Z and Millennials Resort to Buy Now, Pay Later for Daily Essentials

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Gen Z and Millennials are ditching credit cards in favor of buy now, pay later (BNPL) solutions. Consumers age 35 and under comprise 53% of BNPL users but just 35% of traditional credit card holders, per LexisNexis Risk Solutions.

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BNPL is an installment loan that divides your total purchase into a series of equal installments, typically four payments within a six-week term, with the first due at checkout. While BNPL loans typically don’t have interest attached to them like credit cards, they do have late fee penalties that range from a few dollars to 25% of the loan amount.

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When BNPL solutions were first introduced in the early 2010s, many users used these installment loans for just out-of-reach luxuries like plane tickets to Europe.

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Today, BNPL solutions are still used to splurge, but daily essentials now make up a much larger percentage of total BNPL loans. According to NBC News, Gen Z and Millennials on Afterpay, a popular BNPL provider, started using BNPL more for contact lenses (+465% from 2022 to 2023), garbage bags (+182%), lighter fluid (+98%), and other daily essentials.

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In addition, grocery purchases by shoppers of all ages as a category now make up 40% more of all online BNPL loans than this time last year, per Adobe.

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According to FIS Global, BNPL only accounted for 5% of global transaction volume in 2023. However, BNPL is projected to grow at a compound annual growth rate (CAGR) of 24.3% between 2023 and 2030 and remains an attractive alternative to credit cards for several reasons:

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• Convenience factor – BNPL solutions have a simple approval process and typically don’t require credit checks or formal applications like credit cards
• Flexibility – Many consumers prefer the flexibility of pay-in-4 rather than the total amount upfront on large expenses
• Penalties – Many consumers would rather pay the fixed late fees with BNPL solutions compared to daily compounding interest rates with credit cards

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Many Americans live paycheck to paycheck due to increasing costs of living and static wages, so we expect BNPL solutions will continue to increase for daily essentials like groceries and meals.