Marqeta has released a new report highlighting the increased the popularity of credit cards and flexible payment options. This includes options such as Buy Now Pay Later (BNPL). The survey of 1,000 UK consumers showed that 59% of respondents have relied on credit during the pandemic. Yet it also suggests that credit cards could soon be usurped by BNPL as the consumer credit option of choice. 70% reported that they prefer BNPL options to credit cards, citing affordability and ease of management as key reasons. While 54% said that BNPL will replace their use of credit cards. This is despite 35% saying they had tried BNPL for the first time during the pandemic.
State of credit report
Worryingly, the survey showed that while having a wider range of credit options has provided essential support during the crisis, some have found themselves falling behind with payments and building up debt:
- Of those consumers who were already using BNPL solutions before the pandemic, 67% reported their use had increased over the last 12 months. However, more than half (53%) worry that it’s easier to fall into debt with BNPL compared with credit cards.
- 70% of consumers are more conscious of their credit card balance post-COVID, and 60% are more aware of budgeting. Almost a quarter (23%) of consumers reported having struggled to keep up with minimum monthly card payments during the pandemic.
- Despite this, 64% of consumers report using credit cards at least once per week and usage is frequent. With over two-fifths (42%) using their credit cards to make five or more purchases a week.
“Credit cards and BNPL provided a lifeline for many during the pandemic,” says Ian Johnson, SVP, Managing Director, Europe, Marqeta. “The boom in online shopping due to global lockdowns – combined with the ongoing financial insecurity for millions of households. This has created a perfect storm for the surge in BNPL and credit card use. Lots of people are living hand to mouth due to the financial strain of COVID. Having flexible payment options has helped them to make ends meet. For example, allowing them to purchase essentials when they need them, while paying for them at a time that suits.”
The shift to non-traditional payment options
The shift towards non-traditional payment options has shown that consumers are increasingly looking for new experiences and innovation in payments. The report found that many consumers expressed interest in different types of credit cards. Such as a card that supports environmental causes (72%), or a family credit card (43%). Others were keen for more variety in rewards, with lottery rewards and stock portions being popular options. 64% of those surveyed were interested in non-traditional rewards, with 82% interested in building their own rewards programme.
It also found 71% of consumers think that credit history should be built on more than just credit card use – 68% suggested that they would be interested in a product that builds credit history. However, is paid off immediately, like a debit card.
“COVID has irreversibly changed the payments industry. Consumers want to be in control of how they pay, with greater transparency, convenience. Additionally, the ability to monitor spending driving the shift towards non-traditional payment options,” concludes Johnson. “Offering new, user-friendly payments experiences has long been a battleground for banks. But the ongoing economic fallout of the pandemic means that customers are now looking for innovative payment options. Solutions that give them true control over their finances. If banks don’t respond to shifting customer demand, they risk being left behind by their more forward-thinking competitors.”
Marqeta surveyed 3,500 people in July, using Propeller Research to reach people in the US, UK and Australia.
Enterprise Times: What this means for business?
BNPL is here to stay. It will remain a fact of life for digital payments. Online retailers and brands will have to adjust to this new payments reality. Buy Now, Pay Later (BNPL) services have surged during lockdown. Marqeta’s research saw a 350% increase in net revenue from BNPL between Q2 2020 and Q2 2021. Affirm and Klarna, long billed as credit card killers have reached previously unforeseen levels of brand awareness and consumer adoption. Afterpay’s global expansion was punctuated with a blockbuster acquisition by Square, Sezzle is supposed to be looking at an IPO route and Zip is expanding rapidly across the world.
So it’s no surprise that despite all of the talk of upheaval in how consumers want to access credit. Or how payments is now being disrupted by digital technology. The rapid rate of post-pandemic change in payments is still being driven by credit cards. The dominant form of payment.