Buy now, pay later payments have entered the U.S. mainstream thanks to a pandemic-era boom. Recent inflation woes have led consumers to use the short-term installment loans to cover daily expenses, raising concerns about how BNPL providers don’t report to credit agencies and attracting the attention of the Consumer Financial Protection Bureau. The federal agency recently said it plans to regulate the industry like credit cards. 

With Gen Z gravitating to BNPL as a consumer financing tool, Priore said he believes they will bring those digital payments expectations to business-to-business payments as they enter the workforce.

The economics of the BNPL business will eventually shift toward big-ticket items, leaving credit and debit cards as the winner for daily purchases, Priore also predicted

Priority Payments is based in Alpharetta, Georgia and has about 975 employees, Priore said in a recent interview. The company provides services such as point-of-sale systems, B2B payments, and business banking, according to its website. 

Editor’s note: This interview has been edited for clarity and brevity.

PAYMENTS DIVE: Buy now, pay later financing has grown in popularity over the last few years, particularly among lower-income consumers in the U.S How do you see these installment plans changing as the industry matures?

TOM PRIORE: Where I think this kind of ends up is on larger tickets. That's probably the better avenue for Affirm and some of the buy now pay later [companies]. It's more logical for large ticket healthcare or elective medical [expenses].

BNPL loans have become a way that some U.S. consumers cover daily expenses like groceries when money is tight. How do you see BNPL companies handling those kinds of smaller transactions?

I think they will dress up the transaction to look and feel more like a card transaction and pass on that risk to [card] issuers.

Who do you see winning the majority of these small transactions in the future: BNPL or debit and credit cards?

I do think a lot of the smaller ticket stuff probably goes more the way of cards because it's just simpler to manage. And it's more in the lane of the credit card companies to take that risk. So I think that is a more logical outcome.

Why do you think BNPL companies will end up focusing on bigger transactions? 

It will be more driven by a return on capital and whether these smaller ticket transactions make sense to finance in this way … I don't think the economics are going to support it over the long haul, so that will dictate how it's accessible to consumers.

You'll get to a threshold where so much of it's going to get pushed back on the merchant that it won't necessarily make sense from a loss rate perspective.

There’s been a lot of hand-wringing about the emergence of buy now, pay later and its popularity among Gen Z consumers. What effect do you see BNPL and Gen Z having on the world of business-to-business payments?

The Gen Zers who are just accustomed to automation in their day-to-day life are going to adopt those patterns in their business lives as they move into leadership positions.

We're encouraged by this push of Gen Z to drive digital transformation at the point of sale. Because we do think it's going to help drive the narrative of, “hey, we need to start looking for trusted partners that can take us off these legacy systems into a very secure, but more dynamic operating framework to move money, accelerate cash flow [and] optimize working capital.”

By James Pothen on June 25, 2024
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