Buy now, pay later solutions are quickly gaining adoption as consumers look for new financing options and merchants aim to drive sales. But the industry is still unsettled as a number of firms are battling to lead the space, while card networks and issuers are looking to get involved too.

Growing adoption of “buy now, pay later” (BNPL) ecommerce payments should hit an inflection point in 2021 as consumer budgets get stretched and as availability expands. According to CivicScience’s “Trend Adoption Tracker,” BNPL adoption had been steadily rising prior to the pandemic—from 24% in Q1 2019 to 29% in Q4 2019.

For the past several years, BNPL solutions have gained steam as a noncard way to finance large transactions. As unsecured personal loans, which include BNPL solutions, continue to rise, the sector has experienced vast growth of its own.

Consumers are becoming more cognizant of their spending, some even considering financing high-ticket purchases in an effort to not spend all their money in one transaction.

Financing plans and installment payments are becoming more common on ecommerce sites

Consumers who don’t use credit cards are turning to digital installment plans

Meanwhile, embedded finance in Southeast Asia (SEA) has been driven largely by ride-hailing platforms such as Singapore-based Grab—which has rolled out a buy now, pay later (BNPL) solution, micro-investing, and consumer loans to date—and ecommerce companies like India’s Udaan.

Younger consumers are already leaning into these alternative payment plans—and if spending growth slows, more retailers are likely to extend digital installment plans to attract more customers. Key Takeaways. The 2020 retail landscape will be especially challenging and competitive.

Prepare for more cost-sensitive consumers with digital installment payment options. As younger and lower-income consumers find themselves more strapped for funds next season, short-term financing options ease the budgetary burden. Use of digital installment plans grew from 24% in Q1 2019 to 30% in Q3 2019, per CivicScience. We expect this will continue—if not accelerate—with its current trajectory.

Marc Mezzacca, founder of CouponFollow, said his firm’s research had found boomers “the least likely generation to use buy-now-pay-later services, which have become very popular in the younger, more [financially] affected generations. Boomers were also the least likely to have opened a new credit card since the pandemic started or to state that getting discounts was more important.”