Buy now, pay later powers revenue for travel and airline merchants

Financially savvy travelers eager to book flights for the year ahead may hesitate to splurge on the heels of recent holiday expenditures. There’s a way to help alleviate that spending-related stress: With buy now, pay later solutions, budget-conscious consumers can confidently press the purchase button now for a flight to Italy this fall, knowing they can spread out payments over time. 

Consumers are increasingly embracing payment options that are flexible, convenient and hassle free. By 2027, the number of global buy now, pay later users will surpass 900 million, a Juniper Research study predicted.

Around 25 million active global users at PayPal alone made purchases with buy now, pay later in 2022, racking up a total transaction volume of $20 billion, PayPal data shows.

As travelers continue to adopt deferred payment solutions — and may even abandon their cart if their preferred method is unavailable — travel merchants and airlines that offer buy now, pay later options at checkout can meet this demand while helping to boost sales, solidify customer loyalty and drive global customer-base growth.

Who uses buy now, pay later and why?

Buy now, pay later enables consumers to pay for purchases in smaller, more manageable amounts over time. It particularly appeals to shrewd spenders who prefer the convenience and flexibility of splitting payments into affordable installments, often without accruing interest.

Rather than squeezing consumers into a one-size-fits-all solution, buy now, pay later options are tailored to fit financial needs. Travelers might pay for a pair of round-trip economy airline tickets to a domestic destination, for example, in three or four interest-free installments over several weeks. Larger ticket items, such as first-class flights from New York to New Zealand at the height of the winter holiday season, are a better fit for a longer-term loan that spreads monthly, interest-included payments over a period of months or years.

In both cases, buyers benefit from knowing the exact amount they will owe for each payment at the time of purchase and working toward a predetermined payoff date. 

More than 80% of consumers said they favor buy now, pay later because it allows them to keep a cash cushion, a 2021 online study found. As the cost of living rises, buy now, pay later is a friction-free solution for those who prefer to make purchases while better managing their budgets.

Here are five ways buy now, pay later solutions benefit consumers and power revenue for travel and airline merchants.

Buy now, pay later appeals to consumers of all ages

Millennials and Gen Z grew up with digital technology and online shopping, and they see buy now, pay later as an attractive option. Millennials make up 40% of PayPal’s “Pay in 4” users, but they aren’t the only ones who crave choice and flexibility at checkout, according to a PayPal user analysis. Gen X accounts for 35% of users, while baby boomers and Gen Z together account for 25%.

Buy now, pay later attracts new customers worldwide

Adding buy now, pay later solutions has proven to be a successful way for merchants to reel in new customers in the United States and beyond. 

As music, sports and cultural events returned following the COVID-19 pandemic, TicketOne, Italy’s leading entertainment ticketing platform, resolved to meet increased consumer demand by rolling out a budget-friendly way to buy tickets online with no interest or late fees. 

Over the course of 18 months, TicketOne’s option to pay in three installments attracted 26,000 new customers who had not previously made a purchase, according to a PayPal case study.

The buy now, pay later option “was absolutely a win-win situation,” said Giorgio Aretino, TicketOne’s online marketing and e-commerce director.

Buy now, pay later fuels sale

When travelers have access to buy now, pay later options, their average order value increases. Consumers who purchase with buy now, pay later spend 70% more per travel transaction, according to a recent PayPal data analysis.

Globally, travel merchants that introduced buy now, pay later saw sales soar. Spanish airline Vueling, one of Europe’s main low-cost airlines, sought to enhance the customer experience by offering stress-free checkout on any device and a robust selection of payment methods. After implementing a pay-in-three option in 2022, Vueling recorded an unanticipated 210% spike in buy now, pay later sales that year. Average transaction value also increased 8%.

The boost comes from customers purchasing more extras and upgrading flights so they can fly the way they prefer, said Catia Silva, Vueling’s commercial projects manager, noting that the rapid rise “surpassed our expectations.”

“We are really happy with the results we are achieving,” Silva said. “The increasing sales are a result of offering customers what they really need.”

Buy now, pay later cultivates loyal customer

Travelers who add buy now, pay later products to their financial toolkit grow accustomed to the convenience. They return to merchants that provide the flexibility to pay for purchases over time. Almost 3 in 10 travel and airline shoppers using buy now, pay later are repeat customers, a recent analysis of PayPal data indicates.

And merchants need not worry that introducing a buy now, pay later option will cannibalize customers from their private label credit cards, Forrester Consulting’s research into the relationship between the two payment choices found.

Each payment method offers unique benefits and attracts a different type of consumer. Private label credit card users tend to be older or faithful customers and those seeking to build credit. These shoppers desire the discounts and rewards that come with brand loyalty, the research shows. Buy now, pay later appeals to those who are new to the brand and customers who crave convenience, flexibility and interest-free purchases.

Just as the presence of deferred payment options cultivates loyal customers, their absence can chase shoppers away. Two-thirds of buy now, pay later users reported abandoning a purchase because they did not see an option to pay later, a 2021 survey found.

Buy now, pay later solutions give consumers a choice at checkout

The proliferation of buy now, pay later products gives consumers their pick of brands with varying payment plans, deferral periods, fees and credit check requirements. 

In a recent analysis of eight popular buy now, pay later apps, Consumer Reports rated six of the apps at 75 and higher, with five receiving top marks in specific aspects such as appropriate privacy disclosures and data sharing practices. 

PayPal scored the highest with 89 overall and garnered the best scores for fraud protection, safety, privacy and transparency.

Conclusion

Buy now, pay later solutions can propel profits for airline and travel merchants and aid them in attracting new customers and locking in loyalty at no additional cost or risk. 

This type of flexible payment option empowers consumers to purchase on their own terms. Financially savvy travelers value the ability to divide payments into convenient, affordable and often interest-free installments that allow them to stay within their budget.