What the data tells us about buy now, pay later

  • By Anna Shaw

The latest debut on the ASX by New Zealand’s LayBuy highlights that the buy now, pay later sector remains buoyant.

In fact, the BNPL entrant's share price was up 45 per cent  after the first day of trading. While LayBuy is eyeing offshore growth, the recent full-year results from Afterpay revealed solid outlook for the sector. Afterpay reported a 97 per cent lift in revenue with 20,500 new customers being added a day. 

It also comes at a time when a recent Senate inquiry launched its report on fintech regulation, flagging that no oversight of the industry is needed. It is certainly an intresting time for BNPL but will this momentum continue.  RFi Group’s Anna Shaw crunches the numbers 

RFi Group has been tracking key metrics on BNPL services in Australia over a period of time where new providers have emerged, existing services have merged and services have rebranded.

The data has shown consistent growth in awareness of these services among Australian consumers, where in November 2017 there were 1 in 2 consumers aware of at least one BNPL service, in November 2019, more than 4 in 5 consumers indicated awareness. 

This awareness level has remained consistent in the months following this, with awareness in July 2020 remaining at the same level. 

Younger consumers have maintained the highest level of awareness and usage of BNPL services, particularly over the last two years. 

Consumers under the age of 35 are the most likely to indicate awareness of at least one BNPL service, and in July 2020, nearly all (97 per cent) consumers under the age of 25 indicated awareness of at least one BNPL brand, and 9 in 10 (91 per cent) consumers aged 25 to 34 indicated awareness. 

More than 2 in 5 Australians aged 18 to 34 indicating they have used at least one BNPL service, and across the market the data shows a steady increase in consumers who have used more than one service.

RFi Group data also showed that consumers aged 35 to 44 have become more likely to have used a BNPL service, increasing from 21 per cent in July 2018 to 43 per cent in July 2020.

Another side to this is customers using BNPL services out of curiosity – to give it a try or because they thought it seemed like a good deal

When looking at the opportunity for growth in this space, RFi Group data shows that conversion rates from awareness to actual usage appear to have stabilised, with the last twelve months seeing a consistent conversion rate of just over 30 per cent. 

Focusing on specific brands, Afterpay sees the highest level of both awareness and usage, followed by Zip. 

RFi Group data also shows that there is a segment of the market using BNPL services to help them budget, or to make better use of their money through not having to pay for the purchase in full upfront . 

There are also customers using these services because they would not have otherwise been able to afford the purchase. 

Another side to this is customers using BNPL services out of curiosity – to give it a try or because they thought it seemed like a good deal – and the data also shows that having a recommendation from a family member or friend has increased as a reason for use, suggesting that while some customers may use these services out of necessity, others are using it to test out the experience or because of a positive recommendation.

Newer entrants in the BNPL market including Bundll and Klarna have seen usage be driven especially by customers wanting to give it a try, reinforcing the idea that there is a level of customer curiosity that comes with new services being on offer. 

These services are also seeing high levels of customer satisfaction and advocacy, although it is still early days and it is unclear just yet whether these services will cause the market to shift. 

Anna Shaw is the client insights manager at RFi Group