Bolt CEO Justin Grooms Explores the Surging Use of BNPL in Consumer Finance
In a recent discussion with WWD, Justin Grooms, chief executive officer of Bolt, said its marketplace currently serves more than 80 million shoppers in the U.S. and noted that buy now, pay later usage is up 25 percent year-over-year credit card usage dropped 3 percent in the same period. Grooms also said mobile shopping continues to grow, surging 18 percent year-over-year.
Here, amidst discussions at the National Retail Federation Big Show earlier this year, Grooms sheds light on these usage trends and evolving consumer behaviors as well as the strategic adaptations necessary for traditional banks and retailers to respond to these changes.
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As the financial sector grapples with changing consumer expectations, Grooms’ perspective offers a concise overview of current market dynamics and the nuanced interplay of credit services within the retail environment.
WWD: What were some key takeaways from the National Retail Federation Big Show?
Justin Grooms: One thing we noticed was the recognition by some traditional card issuers, the big bank names that we all know of, that the BNPL world was still maintaining some traction even when their cash outflow to capture accounts (paying merchants to capture accounts) was going down. But share of transaction, which we see in our data, is getting traction in an organic way. Consumers are not necessarily treating BNPL as a gimmicky thing or something that they use periodically, but they’re starting to work it into their cash flow management.
We pulled some statistics recently that showed that in our network of shoppers, there’d been a pretty sizable increase year-over-year in usage of BNPL. And we didn’t necessarily have more deployments of BNPL, it was just that it was being used more often. And a fascinating overlay is that there is an overlap of consumers using BNPL and those using premium credit cards, which are traditionally associated with shoppers with better credit.
WWD: What’s the mindset behind this?
J.G.: So, if I’m sitting there at a bank and I’ve got some premium cards and I’ve always thought, “Well, these are my great customers who’ve got good credit, but might carry a little bit of balance on a premium card.” It’s now a little bit of an issue if consumers start to think more like, “Oh, I can just jump over to Klarna and spread this out over four payments.” That’s a fascinating trend. So, it’s not that BNPL is just eating into debit or PayPal usage, it’s eating into other credit people have established.
WWD: BNPL serves as another tool that consumers are using so they can better manage their finances?
J.G.: I think so. The other trend we’re seeing with merchants I’m talking to is that some of them are beginning to articulate the price of goods through payments. This is something we’re kind of familiar with in ads for cars or other bigger ticket items.
Consumers are starting to see high-ticket items in this manner: “Oh, we’re not going to pay $2,000 for this TV all at once, rather, this TV is just going to cost $500 every two weeks for the next eight weeks. This frequency of payment mimics the typical paycheck cadence that I think is causing people to embrace BNPL.
WWD: Are average transactions for consumers using buy now, pay later getting higher or is it more about purchasing big ticket items — or is it a mix?
J.G.: The range of AOVs is expanding. I think that there used to be an optimal AOV size that folks would look at. That used to be in the $500 range, which makes a lot of sense. Some statistics show that most people can’t lay out more than $400 without disrupting their budget. So, you’d see things around the $500 range that seem to have a big anchor point in BNPL transactions.
Now we’re seeing people layering multiple BNPL transactions, including larger and smaller ones because they’re saying, “I’m going to do a little bit of expense smoothing over time.”
One of the challenges we’re hearing from some of the issuing banks, and that came at NRF, was how to communicate the value proposition of their cards to consumers at the relevant point of transaction. Klarna, Sezzle and Zip are doing a really good job of saying, “Hey Justin, you should get this new TV. It’s only going to cost you $500 every two weeks.” That’s really compelling right when you’re deciding to make a purchase.
WWD: What are some of the other challenges banks face?
J.G.: When managing payment options, companies such as Capital One, Chase and others face a key challenge: effectively communicating the relevance of their products to consumers at the crucial moment of purchase. Consumers face myriad payment choices, ranging from various credit cards to BNPL services. The challenge for retailers is to balance providing enough options to meet diverse consumer needs without overwhelming them, which can lead to decision paralysis or abandonment of the purchase.
Retailers must determine the most strategic placement for options like the Affirm BNPL button, which may not be suitable for every purchase, such as buying a small quantity of computer paper. The goal is to cater the payment options to the likelihood of their use in a given context.
Furthermore, consumers frequently exit websites to compare the benefits of different payment options, such as credit limits or rewards, which may result in lost sales if they do not return. Moving forward, a crucial objective for these businesses will be to curate the checkout experience to highlight the most relevant payment options at just the right moment, such as reminding a Capital One cardholder about the ability to “Pay in 4” right when it’s most appealing.
This retail dilemma indicates a broader trend where understanding customer preferences and behaviors through data is becoming vital. The challenge will continue to evolve, and solutions that streamline and personalize the payment process could significantly enhance customer satisfaction and retention.
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