The Changing Buy Now, Pay Later Model: Shift to B2B and Consumer Specialities, Including Donations

By B Generous (Neil St. Clair, COO & Co-Founder)

“Buy Now, Pay Later (BNPL)” has begun to mature as a business model, leaving the best open swim lanes for new entrants in the B2B and consumer specialty spaces. But why has the core idea of BNPL (i.e. getting something now, but paying over time) found such a home and popularity for everything from construction equipment to travel to charitable donations?

The Financed Life

If you’re reading headlines in the financial press these days there’s a very clear truth: people are financing their lives more than ever before. Recent numbers show a rise of total outstanding U.S. consumer credit to $4.76 trillion, ticking up more than $28 billion from the prior month. 28% of consumers have a Buy Now, Pay Later loan, up from 18% in the prior year, and the rise of credit-as-payment for everything goes on. But why?

Yes, there is ostensibly easier access to credit overall and more forms of alternative credit like BNPL, but what is driving the usage of this available credit? Necessity is the answer. It’s never been more expensive to be an American, with certain measures of consumer prices having gone up around 400% over the past 40 years, while real wages have increased only 4% during the same interval–that’s not to mention the cost of student loans, housing, and other major purchases. 70% of millennials are living paycheck to paycheck, including half of those making more than $100,000 per year. Those under 45 have faced the changing global dynamics of 9/11, the financial crisis of 2008, and the COVID-19 pandemic–the results of these major events have been felt extremely acutely as these younger Americans entered the workforce, built families, and attempted to build wealth against these headwinds.

The idea of “Buy Now, Pay Later" is a necessary and meaningful solution to these systemic economic issues for those living paycheck to paycheck. But the idea of “Pay Later” also serves as a helpful tool for those with high levels of wealth to manage cash flow–especially given that many of these platforms are interest-free and no/low fee. The standard use case of “Buy Now, Pay Later” has mostly been in the realm of fashion, retail, consumer electronics, etc. and is heavily dominated by players such as Affirm, Klarna, and AfterPay. The search for new opportunity within the BNPL space has thus been a pivot towards B2B models, and, more recently, niche consumer models such as travel.

This latter notion of a specialized consumer-focused modality is where companies like B Generous come into the field of play. We offer “Buy Now, Pay Later” for charitable donors and nonprofits, what we call “Donate Now, Pay Later” or Give Now, Pay Later.

A New Specialization: Donate Now, Pay Later (DNPL)

According to Fidelity Charitable, the number one reason why more than 70% of donors don’t give more (or at all) is due to financial constraint. The second biggest reason is that they don’t believe their gift will be large enough to make a difference. At B Generous we remove these constraints to allow donors to give what they want to give, not what they have historically been constrained to give.

Our product allows donors to make a charitable donation to a nonprofit without paying any money at the point of donation, but the nonprofit receives the donation immediatelyand the donor gets their full tax deduction right away. The donor then pays for the donation over 3,6, or 9 months without any interest, fees, or costs.

One thing is clear so far, donors who use Donate Now, Pay Later donate significantly more. The average online donation in the U.S. last year was $128 according to Nonprofit Source, but the average Donate Now, Pay Later donation is about $470–almost 300% larger. To put it another way, donors who use Donate Now, Pay Later give roughly 3.5X more on average.

Donors use Donate Now, Pay Later as a tool to make the donations they desire while managing cash flow and avoiding donating on high interest credit cards (the average credit card APR is more than 21% for new offers and more than 16% for existing accounts, according to WalletHub’s Credit Card Landscape Report). DNPL leans into the same behaviors and similar psychology of Buy Now, Pay Later and frees up money for a market (i.e. the U.S. philanthropic market) that is almost the same size as the e-commerce market–around 240 million people giving around $500 billion annually.

In short, B Generous and the idea of “Donate Now, Pay Later” is an excellent exemplar of the overall trend of Buy Now, Pay Later into more curated and specific use cases. Again, this is predicated on the notion of the “financed life,” which is becoming de rigueur for both Americans of means and for those with a more modest financial picture.

“Pay Later” & Recessions

Another set of financial headlines is crying woe over a forthcoming recession. Whether this happens or not remains to be seen. The broad idea of Buy Now, Pay Later is going to come into heavy usage in a recessionary environment, similar in pattern to what we saw during COVID-19.

Interestingly, for our corner of the world in the charitable giving space, as research from America’s largest donation management technology company, Blackbaud, points out, giving through recession generally remains flat–or at least a lagging indicator to recession and recovery.

However, the concept of Donate Now, Pay Later is an excellent tool for weathering an extended financial storm by allowing donors to spread out payments while waiting for economic normalization. It’s our belief that DNPL will further ensure non-interruption of services and smooth cash flow for nonprofits, many of which provide vital services and major social impact for our most vulnerable populations.

We would expect similar merchant and consumer recessionary logic across other areas of Buy Now, Pay Later as well. That is, using BNPL as a way to extend repayment if/when cashflows hit a dry spell.

To learn more about B Generous and the nonprofits we serve, head to our Get Started page today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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