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BNPL's growth is slowing significantly, Adobe says

Illustration of a person holding a shopping bag made out of a calendar. 

Illustration: Shoshana Gordon/Axios

The growth of buy now, pay later (BNPL) at the start of this year slowed significantly, though remained robust, according to the most recent data provided by Adobe.

Why it matters: Retailers have turned to BNPL to get consumers to spend more, in some cases even investing their own money in these payment providers (see Macy's five-year partnership with Klarna in 2020).

By the numbers: In January and February, BNPL orders grew 53%, while revenue increased 56% year over year, Adobe said.

  • This is down significantly from the fourth quarter: Orders using the payment option in October and November of 2020 grew by 528%, while revenue increased 412% from a year earlier.

Flashback: Early last fall, RBC Capital Markets estimated that a BNPL option increased retail conversion rates by 20% to 30% and lifted the average ticket size by 30% to 50%, per a CNBC report.

  • RBC, however, declined to say whether it had revised those figures since the slowdown seen this year.

What they’re saying: Citing industry data, BNPL may be currently increasing the average shopping basket size between 15% and 20%, says Hemal Nagarsheth, an associate partner in the financial services practice of consulting firm Kearney.

  • He noted that retailers are using BNPL offerings to improve open rates for marketing outreach, which has attracted new customers, driven follow-up purchases and boosted the purchase of higher quality, higher margin goods.

Yes, but: “Given current inflationary trends and higher fuel costs, there’s some downward pressure on consumer discretionary spend that’s testing the resiliency of credit expansion on basket size,” he adds.

💭 Our thought bubble: Klarna's valuation cut and the recently canceled merger between BNPL players Zip and Sezzle spell choppy waters for BNPL — and we're wondering how retail players will pivot.

  • Apple Pay Later, the consumer electronic company's new BNPL offering wherein it lends off its balance sheet, raises the stakes and could prove to be an attractive alternative to the early entrants.
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