Will that be cash, credit or pay later?

From the C-Suite newsletter: Pay-later options are helping drive conversion, higher average purchases and premium upgrades.


This story originally appeared in the Winter 2021 issue of strategy.

In a sign that payment flexibility is becoming more important during hard economic times, a wave of brands in Canada – from Samsung to Hudson’s Bay – are beginning to partner with “buy now, pay later” (BNPL) providers. Unlike traditional installment loans for big-ticket items, which have been around for decades, these payment options are being used to finance smaller, less-expensive purchases – from jeans to makeup and electronics – and in some cases, without late fees and interest.

There are now several Canadian providers, including Flexiti, Uplift and PayBright, that are facilitating payments for a growing number of retailers. Sephora, for example, uses PayBright, which SVP marketing Deborah Neff says is promoted in many of its marketing materials, because it’s “important for our clients to understand the different options [and] flexibility available to them.” PayBright recently ran its own marketing blitz, working with agency Round to create the “Break Up the Cost” campaign featuring products from partners like Sephora.

Given the current economic climate and the fact that thousands of Canadians are now relying on government assistance, Armin Begic, executive director of Canadian retail at the NPD Group, says pay-later options may become increasingly important to retailers.

A 2020 report by NPD found that 20% of online shoppers and 30% of millennials prefer to shop at stores with monthly installment options. And, in a survey by payments tracker Cardify, two-third of respondents reported buying discretionary items they might have not purchased if a pay-later plan wasn’t offered; nearly half said they spend between 10% to 40% more from a brand that has those options than when buying with a credit card.

Sectors beyond retail are exploring BNPL as it becomes popular among consumers. In December, Air Canada partnered with Uplift – a travel-focused provider that also works with Transat, Porter and Sunwing. Keith Wallis, senior director of distribution and payments at Air Canada, says the airline is finding that BNPL helps drive premium upgrades.

In part, Wallis credits subscription services like Netflix, Apple and Spotify for helping to popularize the model. “This isn’t subscription, but paying for things in smaller increments over time has become so well acceptable and almost the norm in any kind of ecommerce environment.” And while the economic crisis has made pay-later options more relevant to consumers today, it’s also something Wallis believes will remain relevant “even after the pandemic is behind us.”

Correction: The version of this article that appeared in print mistakenly identified Air Transat as an Uplift partner. The pay-later provider is currently available with Transat vacation packages. The article also identified Uplift’s headquarters as being in Toronto. Strategy regrets these errors.