How buy now, pay later benefits merchants

With more businesses thinking about adding buy now, pay later to their suite of payment options, payments company Stripe decided to look into the issue.

In order to gauge the impact of BNPL, Stripe looked at 150,000 payment sessions and analyzed the data on those involving buy now, pay later, concluding the option leads to more purchases with bigger dollar values.

The rules for the industry are in a state of flux. Last month the Consumer Financial Protection Bureau said BNPL payments should be treated like credit card loans.

San Francisco-based Stripe was founded in 2010 and processes payments for millions of websites.

Eeke de Milliano, the company’s head of global product, said the firm handled around $1 trillion in payments in 2023. Stripe does not offer its own BNPL products, but wanted to educate its customers on the payment option, de Milliano said.

She discussed the findings of her company’s research in an interview with Payments Dive.

Editor’s note: the following interview has been edited for clarity and brevity, and is based on a transcript provided by Stripe.

PAYMENTS DIVE: How was Stripe able to conduct this research?

EEKE DE MILLIANO: One of the reasons Stripe can do this is because we just process so much volume. More than $1 trillion in volume was processed on Stripe last year, which was about 1% of the GDP of the internet. With that huge trough of data, we’re pretty uniquely positioned to be able to run these kinds of experiments.

Why did Stripe look into this?

The payments landscape is getting ever more complex, and payment methods are proliferating. Consumers are becoming more sophisticated and you just can’t accept credit cards as the only way to sort of accept payments anymore. In fact, it was a merchant who came to us to ask “Hey, can you help me understand what I can do with BNPL?”

How much is buy now, pay later growing?

We’ve seen BNPL volume grow 172% in just the past year which really outpaces other payment methods. But buy now, pay later options are priced at a premium and merchants are still trying to understand the value.

What were some of the key findings from your research?

Businesses [that offered buy now, pay later] saw up to a 14% increase in revenue, which resulted both from increased conversions, and then higher average order value. That was takeaway number one. 

Takeaway number two, which I think is a very interesting one to highlight, is there’s often a perception that BNPL is only relevant, or only helps with conversions on [more expensive] products. But what we found was that across the board, from [the least expensive products] to [the most expensive], conversions went up when you offered BNPL.

And then there was takeaway number three. Often the concern from businesses that are thinking ‘Hey, should I offer BNPL?’ is whether or not BNPL cannibalizes [credit card] sales.And what we found was that 66% of BNPL volume came from net new transactions.

Can you go into a little bit more detail about what you mean by ‘net new transactions?’

That means that these are transactions that are coming from consumers who have not previously bought on Stripe or with this merchant.

What is important about these findings?

We have consumers asking for BNPL and we have merchants asking should I accept BNPL or not? This should hopefully help them make that decision a little bit more easily.