What can we learn from the Gen Z love of BNPL?

Gen Z is known to lead the charge when it comes to the adoption of new payment methods – which is good news for BNPL, which has had some high-profile knock-backs and more than its share of negative headlines.

Buy Now, Pay Later (BNPL) saw explosive growth during the pandemic, which continues now during the cost-of-living crisis. As such, it has established itself as one of the most widely used forms of credit. 

Yet BNPL has suffered a string of bad press, accused of fuelling credit debt and having a negative impact on financial wellbeing. Specific examples include London-based fintech Zilch being criticised for advertising virtual BNPL cards to pay for shopping at Sainsbury’s and Apple being slammed for making its Pay Later service too easily accessible to young people. Even BNPL household name Klarna caught negative attention when it launched its “Eat Now, Pay Later” service with Deliveroo.

But it’s not all bad news for BNPL. Research shows that Gen Z is increasingly embracing BNPL, particularly for smaller ticket items, with 70% using it for purchases of less than $100.

How Gen Z re-discovered BNPL

BNPL is a form of credit that resonates with younger consumers for several reasons, offering the flexibility and convenience they value.

The appeal of BNPL services lies primarily in their seamless, user-friendly nature. Gen Z customers value the ease of managing payments in small, manageable installments, which helps alleviate financial strain, particularly during the uncertain economic times we’re currently experiencing. Despite this, there are areas for improvement, which presents a substantial opportunity for both fintechs and traditional banks to refine their offerings and capture a larger, and younger, market share.

With very few in this generation using physical cards, now is the time to align BNPL offerings with Gen Z values by incorporating features that resonate with this generation's preferences for financial flexibility, transparency, and social responsibility.

How fintechs can create BNPL offerings with Gen Z values

Gen Z consumers prefer flexibility in financial products, so fintechs should offer customisable payment plans where users can adjust installment schedules based on their cash flow.

Linked to this, a key value for Gen Z is transparency. Offering zero-interest or low-interest plans with clearly stated fees, as well as avoiding hidden penalties, will foster trust and encourage use.

Gen Z is also more inclined to support brands that prioritise sustainability and social impact. Fintechs can partner with eco-conscious brands or those with strong social responsibility practices, highlighting these merchants in the app as preferred BNPL choices.

Naturally, Gen Z is highly mobile-centric, BNPL platforms should also be optimised for mobile use with intuitive, fast, and user-friendly interfaces. Offering features like instant approvals, quick payment options, and real-time updates on payment statuses will enhance the user experience.

Furthermore, since many Gen Z consumers discover products on social media, integrating BNPL into these platforms can make purchases even more seamless. Features like in-app purchasing from Instagram or TikTok, with BNPL embedded, can capture this audience effectively.

It’s also possible to take this a step further by gamifying the BNPL experience; offering rewards for responsible use, such as discounts, cashback, or badges for completing payments on time. These features can motivate Gen Z users to stick to their payment schedules and foster positive financial behaviour.

Perhaps most importantly when it comes to future-proofing BNPL offerings, fintechs should align with emerging technologies, for instance by developing crypto-friendly BNPL services. As Gen Z has shown growing interest in cryptocurrencies, fintechs could explore allowing BNPL payments in crypto in a bid to attract more tech-savvy Gen Z consumers. Leveraging blockchain for greater transparency in payment processing and data security also aligns with Gen Z's appreciation for innovative technologies and ethical business practices.

Gen Z has given BNPL a chance to redeem itself, but it can only do so successfully by aligning BNPL offerings with Gen Z values. By offering sustainable, ethical, and flexible payment solutions alongside mobile-first experiences, fintechs can create BNPL services that truly resonate with this socially conscious and digitally native generation.

And if fintechs are to take these steps to give BNPL a new, Gen Z-friendly makeover, it would also be advisable to take the opportunity to do more to encourage responsible spending. For example, rather than offering blanket high spending limits, fintechs can set personalised spending caps based on users' financial health. Not only will this reduce the likelihood of debt accumulation, it will improve the reputation of BNPL among all age groups.