Every two years we undertake a comprehensive qual/quant study on Australian small businesses and their financial services behaviour. We first did this study in 1992, and have just finished the latest edition. In recent studies we’ve been following the growth of the Buy Now Pay Later movement and the 2022 edition has thrown up some interesting BNPL issues.
As far as the stockmarket is concerned, BNPL is on the nose. Companies that just a year ago were on dizzying valuations have been pummelled, and it doesn’t look like getting any better for them in a hurry. But what do businesses think – that is, the very businesses that accept payment via these schemes and see them as a marketing channel?
Well right off the bat it is clear that they are still as attracted to BNPL as they ever were … indeed more so. So while the stockmarket is caning them, the reality is that businesses that use them think they are incredibly valuable.
Consider a few facts …
Of those that accept payment via a BNPL scheme, 43% rated them as ‘very good for business’ and 34% ‘moderately good for business’. 22% suggested they ‘haven’t made much difference’ while 1% said they’re ‘bad for business’. So 77% rated them as ‘very good’ or ‘moderately good’ for business. That says it all.
But their delight is increasing … in 2020 only 24% rated them as ‘very good for business’ – ie compared with 43% now.
Of those that use a BNPL scheme to accept payment, 57% use one … 21% use two … and 22% use three or more BNPL schemes.
16% of the SBs we surveyed use (at least) one … and 8% stated they intend to use one within a year … while 7% are still deciding.
Drilling into the types of businesses that use BNPL, an especially strong trend emerges – which is more about the age of the business owner than the business itself. As is clear in the following diagram, the younger the business owner, the more likely the business is to accept BNPL, or expect to be doing so within a year. In fact 48% of business owners aged <30 either currently accept BNPL payment, or expect to do so within a year ...
Currently accept BNPL … or intend to within a year
The media makes a lot of noise about the tightening credit environment and the challenges that consumers using BNPL are going to have – with a potentially damaging impact on the BNPL business case. That may well happen, in fact it probably will. But at this point in time, businesses that use them still rate them.
Conclusion
Everybody could see that the BNPL valuations were numbing … and a re-rate was a certainty. And with a tightening credit cycle it is probable that some BNPL schemes will come undone. More mergers between players are surely inevitable. But it’s easy to get caught up in the noise and misread what these schemes mean for the businesses that use them to accept payment. They still find them very valuable, indeed more so than a couple of years ago.
