The Supply Side: More Retailers Offering ‘Buy Now Pay Later’ Holiday Financing


Buy now, pay later, financing is becoming a must for Walmart, Amazon, Target, and many other retailers ahead of the holiday shopping season. Walmart was the king of the box for years, giving consumers the option to buy Christmas gifts or other expensive items on time at no additional charge.

One caveat was that consumers had to pay regularly for layaway items, and the purchase must be completed and picked up at the store by Dec. 15.

This year’s consumers don’t have that option. Walmart recently moved into a new financing program offered by Affirm, a finance company that provides installment loans for retail purchases for a specified time.

Peggy Knight, vice president of Woodridge Retail at Rogers, spent 22 years at Walmart before leaving the company in 2006 as senior director of financial services. Knight said the move to Affirm is not a replacement for layaway. He said that many clients who often use layaway are unbanked and often negotiate in cash. Affirm and other Buy Now, Pay Later financing programs require a registered bank account or credit card, which is debited monthly for payments.

“It looks like this new program will put some of Walmart’s top shoppers out of luck this holiday,” Knight said. “I can certainly understand that the department requires more hours of work, and there is the problem of having to store the items often in containers behind the store or in the back rooms.

“But there is no way to value all the good publicity that Walmart has received over the years, when celebrities walked into stores at random and paid everyone’s advance payment before Christmas.”

The other problem with comparing layaway to Affirm financing is that Walmart charged no interest for holding items and allowing customers to make regular payments. Affirm charges interest in most cases, which is determined by your credit score. Walmart said most purchases would incur a fee with an APR between 10% and 30%, depending on the credit rating and the item purchased. Some things are still eligible for a 0% APR, but it will usually be a promotional offer that will only affect certain items.

It is not the first time that Walmart has shelved its program of vacation packages. The company cut the sections in 2006, citing a lack of interest from customers.

The company got it back in 2011 on a limited basis and reinstated the program in 2012 under the direction of then-Walmart US CEO Greg Foran.

Walmart recently said it opted not to use layaway this year due to declining usage in recent years. Walmart executives have said they are confident that retailers’ payment options are now the right solutions for today’s customers.

Scott Benedict, director of retail studies at Texas A&M University, said he understood the reasoning behind layaway shelving amid job constraints and the cost of storing the items.

“Affirm and other pay-for-time solutions have become much more prevalent in recent years as consumers have made more purchases online for everything,” said Benedict. “Target hasn’t traditionally offered layaways and now offers Affirm financing, and that’s a smart move on their part.”

Target recently announced that customers can apply for Affirm financing for purchases over $ 100. Target also partnered with Sezzle, another payment solution that allows consumers to pay over time without interest. The Sezzle option, like the Affirm payment plan, requires consumers to submit an application, and their credit limit varies based on credit score and ability to pay.

Consumers who shop through the Sezzle app can place their orders. Then, Sezzle pays Target for the total purchase. Consumers then set up a payment plan that is typically four to six weeks, depending on the size of the order. Sezzle does not charge interest, but consumers must have a bank account or a preloaded Visa or Mastercard debit card with which to pay for the purchase.

“We know our guests want easy and affordable payment options that work within their family’s budget,” said Gemma Kubat, president of retail and financial services at Target. “Through our partnerships with Affirm and Sezzle, Target is investing in new financial tools that make our shopping experiences more flexible and personalized to guest needs, just in time for the holiday season.”

Bed Bath & Beyond, Macy’s and Amazon have also recently begun offering shoppers buy now and pay later options for select purchases.

Mark Vinter, a senior economist at Wells Fargo Securities, recently said that the buy now, pay later financial market was already causing a sensation before the pandemic and is now looking to amplify before the holiday season. He said the biggest players in buy now, pay later financing are Affirm, Klarna, Paypal’s Pay in 4 service, and Afterpay, which was recently acquired by mobile payment platform Square.

Vinter said that part of the popularity of the services is because it is cheaper than paying with most credit cards that charge higher interest rates. He said it’s also an option for consumers who don’t want to go through extensive credit checks and those who may not have high enough credit scores to get traditional cards. He cautions that flexibility in payment options is called better “point-of-sale financing,” and says it could lead some consumers to make purchases that they really can’t afford. Vinter said some governments like the UK have started regulating the finance industry buy now, pay later.

Vinter said stimulus and monetary support kept many households afloat amid the pandemic, and credit scores on average improved as lockdowns limited spending options.

“Consumers remain in a very good position. Still, the growing popularity of these programs invites some credit risk, especially as they are in high demand among younger generations, who tend to struggle more with badly delinquent credit card debt. Also, while some of these programs do not have interest rates, others may have greater repercussions for late payments, ”said Vinter.

A recent survey by consulting group McKinsey estimated that buy now, pay later platforms have diverted between $ 8 billion and $ 10 billion in annual revenue from banks and credit card companies in the last 18 months. McKinsey also estimates that point-of-sale credit will account for 13-15% of unsecured loan balances by 2023, compared to 7% in 2019. The survey also found that 60% of respondents They said they would probably use the point of sale. sales programs in the next six months to a year.

Editor’s note: The supply side section of Talk Business & Politics focuses on companies, organizations, issues, and individuals who are dedicated to providing products and services to retailers. The supply side is managed by Talk Business & Politics and sponsored by Propak Logistics.

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