Affirm, a prominent financial services provider, has announced a collaboration with Costco, enabling customers to pay over time through a Buy Now, Pay Later (BNPL) option when shopping on Costco’s website. This strategic partnership mirrors a growing trend among consumers to utilize alternative payment methods amidst rising interest rates and economic uncertainty. Not only does this partnership aim to enhance consumer shopping experiences, but it also aligns with a broader shift towards flexible payment solutions. The collaboration reflects the changing consumer preferences towards managing expenditures more effectively by spreading out payments over time.
Costco has already shown interest in BNPL through its partnership with Citi. In a 2023 initiative, Costco partnered with Citi to provide the Citi Flex Pay BNPL option for its Anywhere Visa cardholders. The recent collaboration with Affirm enhances Costco’s suite of payment options, offering additional flexibility to its customers. This move is aimed at fostering customer loyalty and driving more sales by making higher-value purchases more accessible to consumers.
Why Are Flexible Payments on the Rise?
Flexible payments like BNPL are becoming increasingly popular as consumers seek alternatives to traditional credit cards. With the U.S. BNPL market size now estimated at $175 billion, an uptrend in this payment method is evident. An analysis by PYMNTS Intelligent highlights that by the end of 2024, approximately 38% of U.S. consumers were using BNPL services, marking a significant increase from 24% the previous year. Consumers are gravitating towards BNPL as it offers an opportunity to optimize cash flow, especially for larger purchases, bringing a sense of financial control in unpredictable times.
Do Consumers Opt for BNPL by Choice or Necessity?
Consumers are divided between using BNPL by choice or necessity. Some individuals prefer BNPL to better manage payments for larger purchases and optimize cash flow, while others rely on it due to financial constraints. According to PYMNTS data, those who choose BNPL spend around $777 on average, whereas those driven by necessity spend approximately $576. This reveals a nuanced landscape where personal financial strategies and situations dictate the preferred use of this payment method.
Affirm’s prior expansions into other sectors, including its partnership with UATP to enable BNPL for travel-related expenses and Revolve Group for fashion retail, illustrate the company’s strategic growth. Such partnerships facilitate diverse usage of BNPL, supporting different consumer needs. Moreover, the integration of Affirm’s service across these industries highlights the versatile nature of pay-over-time options, further embedding this payment trend into consumer habits.
As economic conditions grow challenging, more people are turning to BNPL. Versatile Credit’s CEO, Ed O’Donnell, emphasized the importance of financial certainty and planning:
“[People] want certainty — especially in an environment where, economically, things are a bit uncertain,” he stated. “[With pay later], you can create your own confidence within your own budget.”
BNPL’s growth reflects a broader consumer movement towards budgeting with flexibility and control in uncertain economic times. For enterprises like Costco and Affirm, this represents an opportunity not only to increase sales but also to deepen customer relationships by offering desirable financial solutions. The evolving landscape of payment options demonstrates consumers’ desires for methods that align more closely with their financial strategies. As this market evolves, consumers are likely to experience more tailored solutions, potentially changing how people approach purchases.
