Born and raised in the world of online shopping, Buy Now Pay Later is expanding beyond the digital sphere and finding a home in traditional brick-and-mortar shops for its next phase of growth.

As consumers shake off the tethers of the global pandemic eager to resume past habits, a return to more in-store shopping is underway. But rather than acting as a brake on the rapid growth of BNPL, this shift is providing point-of-sale lending an important new avenue for growth.  

BNPL is in fact so well-placed to capitalize on this shift that the ecommerce technology company Global Payments declared in a report that 2022 will be the year that BNPL matures into a mainstream payment method.

In-person shopping + BNPL is a winning combination. Customers can enjoy the tactile satisfaction of browsing physical merchandise without sacrificing the convenience they have come to expect with online BNPL options.

BNPL providers are starting to turn up in brick-and-mortar locations around the world.

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A Growing Number of Options

In the UK, major retailers like clothing store New Look, shoe seller Schuh and iSmash, an express repair service for computers, smartphones and tablets, offer Klarna in their stores. Sweden’s H&M also offers an in-store Klarna option.

Thanks to Klarna’s partnership with Simon Properties, its services are available to participating retailers at the more than 200 malls Simon operates in Europe, Asia and North America.

Laybuy allows for in-store purchases in UK shops via its digital card, accessible through its app. Customers simply tap their smartphone on a card machine in select retail locations to set up a point-of-purchase payment plan – six weekly interest-free payments, under Laybuy’s “Tap to Pay” option. Unlike most BNPL providers, however, Laybuy does require a hard credit check.

In January, Jack Dorsey’s Block bought Australia-based Afterpay for US$29 billion. Analysts sifting through the synergies between the two said the hefty price tag was justified in part by the likelihood that the addition of the BNPL provider will bolster Block’s competitive position in the in-store market.

Both companies have fistfuls of existing merchant deals, including one Afterpay reached in 2021 with Westfield shopping centers that allows U.S. shoppers to use its BNPL option on-site at such retail giants as The Container Store, Aldo, Lush Cosmetics and The Children's Place. Afterpay is also available within the four walls of major retail outlets across the United States, including Skechers, Levi’s, Forever 21 and Nordstrom.

BNPL provider Affirm, meanwhile, has staged marketing campaigns with its in-store partners, which include Warby Parker and Walmart. Affirm and Walmart teamed up last year, in a partnership that saw Walmart shelve its own layaway option and adopt BNPL for both online and real-world shopping. In-store shoppers simply apply for Affirm lending online, then scan a one-time barcode at the register.

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Quid (Or Dollar) Pro Quo

Offering BNPL options gives brick-and-mortar merchants a fighting chance at competing with on-line shopping sites that offer easy, streamlined checkout. In-store shoppers know all too well the frustration of standing in line waiting for checkouts stalled by inefficiency, low staffing levels or computer glitches.

Research from PYMNTS, a data analysis company, found more than a fifth of consumers surveyed said they would be encouraged to shop at physical stores with BNPL options. The generational breakdown was telling: one-quarter of Gen X shoppers polled said they would find BNPL an attraction, a sentiment shared by 23% of Gen Z and 29% of Millennials.

A separate study from PYMNTS found that 59% of what it termed “financially secure” consumers open to using BNPL were more likely to shop in physical stores where it is on offer.

BNPL promises to boost volumes in real-world stores just as it does in their online counterparts. At grocery stores that have adopted BNPL, baskets are piled 50% higher than they are ordinarily, according to Blackhawk Network.

It also has an impact on that secret sauce sought by retailers everywhere: customer loyalty. Provider Sezzle said it was seeing an increase in repeat visits to physical stores in the order of 12.9% due to the availability of BNPL. BNPL payments can also be contactless, via a smartphone app or self-checkout: a sought-after choice amid lingering COVID concerns.

So just as in the ecommerce world, the presence of BNPL in-store appears to boost the average value of customer shopping carts, helps grow repeat customers, is easier to obtain than traditional credit and offers seamless checkout.

Point-of-purchase borrowing is clearly here to stay in ecommerce, with BNPL payments predicted to account for almost a quarter of global digital transactions by 2026. It seems equally clear that the world is seeing a resurgence in real-world retail as the pandemic fades into history – and then some. According to research firm IHL Group, for every U.S. store that closed in 2019, five opened in 2021.

Now that it is able to offer consumers a quick and convenient way to fund purchases both online and in-store, it looks as though BNPL is once again in the right place(s) at the right time.

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