BNPL Becomes Table Stakes, But Smart Moves Can Offer Competitive Advantage

Jan 4, 2022 by Rebecca Sausner

Happy 2022 to the Shoptalk community! I’m excited to focus this year’s first Sundays with Shoptalk on a topic that’s a favorite given my fintech roots: buy now, pay later, and how retailers should be thinking about it going forward.

Let’s set the scene with some numbers: There were about 45 million active BNPL users in the U.S. in 2021, according to research by Accenture, commissioned by Afterpay, with spending reaching 2.4 percent of ecommerce sales. One-third of all Americans will make a purchase using a BNPL provider in 2022, including 44 percent of Gen Zers, according to eMarketer forecasts.

Retailer Adoption

Shoptalk’s tally of the top 100 U.S. retailers by sales volume found that just over half offered some form of BNPL, with 11 offering consumers multiple BNPL options. The 47 that didn’t are primarily grocery and convenience retailers.

Shopper data indicates that offering BNPL brings retailers new customers and increases order size. The acquisition cost is somewhere between 1-7 percent of the sale, typically slightly higher than the cost of credit and debit orders.

So let's agree that BNPL is an important and growing part of the payments landscape, with many more retailers likely to jump in. This comes as the industry moves from its "wild west" days to greater maturity, spurred by increasing regulatory scrutiny.

For retailers embracing BNPL, the first questions are how many partners should a retailer have? Which partnerships can drive the most new sales? What’s the best way to roll out the offering in physical stores?

BNPL Growth Strategies

The answers require a look at the growth strategies of leading BNPL players in the U.S. market: Klarna, Affirm, Afterpay, Zip, Paypal and Sezzle. These firms are in land grab mode, vigorously chasing M&A and partnership deals designed to give them inroads to the greatest number of merchants. Among the bigger deals: Square (now Block) will acquire Afterpay. PayPal acquired Japanese BNPL firm Paidy. And Klarna has many deals, including recently announced deeper partnership with Stripe. All of these BNPL players believe they can find competitive advantage in how many new customers they drive to their merchant partners.

“We bring approximately a million net new customers to our merchants on a daily basis,” says Zahir Khoja, General Manager of North America for Afterpay.

If that’s the value add, merchants should probably look at the size, and makeup, of a BNPL partner’s network. Some examples: Sezzle claims 44,000 merchants in its network, including Target and Gamestop. Klarna said in July that it has more than 10,000 U.S. merchant partners, including 24 of the top 100 retailers. Afterpay reported about 100,000 merchant partners as of June 2021, including Macy’s and Nordstrom. Affirm has more than 12,000 merchants in its network, including Peloton and Amazon.

The question of how many partners is the right number is still an open one. Retailers need to avoid overcomplicating the checkout process with a “Nascar-like” array of BNPL and other payment provider logos. It’s therefore common to see two options, plus PayPal, at Top 100 merchants. For example, Dick’s Sporting Goods, Target and Amazon all offer Affirm, plus another provider. Lululemon, Bed, Bath & Beyond and Nordstrom each offer AfterPay plus another provider.

Customer-Facing Innovations

But it’s not just the network size that will differentiate the various BNPL platforms. More recent innovations involve presenting BNPL options earlier in the shopping journey. Some retailers display a BNPL option next to the item the potential buyer is browsing; Klarna recently introduced a browser extension that allows users to use Klarna at retailers that aren’t part of its ecosystem. Other efforts include loyalty plays. And nearly all of the players offer a digital card solution that makes the payment option available in store without changes to installed point-of-sale technology, a phenomenon that seemed ever-present in malls this holiday season.

The other differentiations among players is found in how their financing is structured: fees or no fees, interest or no interest, etc. and how transparently those are disclosed to consumers. These factors are critically important now as the Consumer Financial Protection Bureau recently announced an inquiry into industry practices. 

Advice to Merchants

Ron Shevlin, Director of Research at Cornerstone Advisors and a contributing editor at Forbes, doesn’t think the threat of regulation will have much of an impact on the industry, or merchants. However, it may result in BNPL transactions all being reported to the credit bureaus. 

His advice to merchants? That retailers begin to think of payments as the fifth “P” in the marketing credo that originally included just 4Ps - product, price, place and promotion.

“Payments are reaching strategic importance,” Shevlin says. “How we pay today influences what we buy and who we buy it from. Retailers have to understand that and use payments as part of their marketing mix, because it influences consumers. Of course BNPL is just one aspect of that.”

The content and conversations at Shoptalk 2022 will also cover many aspects of payments. Among them, four sessions covering “Payments and Checkout Innovations.” Attendees will hear from Sebastian Siemiatkowski, Co-Founder & CEO, Klarna; Alyssa Cutright, VP, Global Payments & Risk, eBay; John Strain, Chief Technology Officer, Gap Inc. and others on the payments stage.

In the exhibit hall, attendees will have the opportunity to talk payments with Synchrony, Afterpay, Klarna, Amazon Pay, Sezzle, Affirm, Ibotta, GR4VY, IXOPAY,, PrimeiroPay, Payoneer, Bolt, Nuvei, Citizens Bank, Forter and more.

Visit for regular updates on the agenda, and to see which payments companies have been added to the sponsor and exhibitor roster. And merchants—plan to get all your payments meetings taken care of in one place, as Shoptalk expands its audience across the payments ecosystem.

All the best for a healthy and prosperous 2022!

Best regards,

Rebecca Sausner
General Manager