The Deferred Payment Market Has Officially Taken Off
It’s safe to say that our email inboxes, social media feeds, and online shopping trips have been filled with endless holiday promotions and shipping delay notices. But this year, we saw a new term pop up more than ever: “Buy Now, Pay Later.”
In my latest research, “New Tech: Deferred Payment Providers, Q4 2020,” I explore one of the hottest topics of retail payments in 2020 — one we call deferred payment solutions. Deferred payment solutions — a broad category covering installments, “buy now, pay later,” “pay in four,” point-of-sale financing, alternative lending, and others — promise merchants a boost in conversion rates, higher average order values, and increased repeat purchases. In the report, we provide an overview of 29 of the emerging players. While the idea of paying over time is not a new concept (some of the major players have indeed been around for decades), the deferred payments market has gained traction in recent months. Here are some of our key findings:
- Venture capital (VC) funding has grown over 200% in the past two years. Across the 29 companies we evaluated, more than half of their funding occurred within the past two years. In 2019, these companies brought in a collective $1.77 billion in VC funding, then gained further steam this year. In the first three quarters of 2020, they had already received a total of $1.86 billion.
- Key players have ramped up the acquisition of smaller vendors. Companies like Affirm, Afterpay, and Klarna have been working hard to extend their geographic reach by acquiring smaller, country-specific deferred payment vendors in other markets. Australian-based Afterpay broke into the UK market with its acquisition of Clearpay in 2018; Klarna has acquired multiple vendors in Germany; and Affirm recently bought the dominant Canadian player PayBright.
- The US market is the most saturated, but consumer adoption is lackluster. The US is home to the most vendors, but adoption is higher in Australia and Europe. Stockholm-based Klarna — now present elsewhere in Europe, in the UK, and the US — was one of the first players to enter the “buy now, pay later” space and is the top digital payment in its home country. Meanwhile, in the US, only a single-digit percentage of online consumers regularly use deferred payment options. However, while low, adoption in the US has doubled (albeit still in single digits) within the past two years.
To learn more about the deferred payment market and its key players, read the full report here, or schedule an inquiry to discuss the evolving market and what it means for your firm. To gain an even deeper understanding of the deferred payments world, be sure to register for my webinar on Tuesday, December 15, 2020, at 1:00 p.m. EST, or catch the playback recording on Forrester’s website.
(Written with Nicole Murgia, research associate)