- Amid the buy now, pay later boom, big-box store chain Target has added Sezzle and Affirm as installment payment options for shoppers, the retailer said in an online post Wednesday.
- Customers can use Affirm for purchases worth more than $100 on Target's website, per the announcement, but they must first apply with Affirm before they can use it as a payment method at Target.
- Similarly, shoppers apply first with Sezzle and then can use it for shopping on Target's website or mobile app, paying with Sezzle's Virtual Card at checkout. Customers can use the option through Apple Pay and Google Pay, and for drive-up orders as well as same-day delivery orders through Shipt, the company said.
As the holidays approach, Target is trying to make gift-buying fit within the family budget, said Gemma Kubat, Target's president of financial and retail services.
"Through our partnerships with Affirm and Sezzle, Target is investing in new financial tools that make our shopping experiences more flexible and personalized to guests' needs," Kubat said in a statement.
In addition to Target, San Francisco-based Affirm has teamed with other retail partners over the past few years, including Amazon just a couple months ago in August , David's Bridal last year and Walmart in 2019. And Affirm bolstered its own finances earlier this year by raising $1.2 billion in an initial public offering.
Minneapolis-based Sezzle has cultivated corporate ties too, including with card company Discover Financial Services. Earlier this year, Discover invested $30 million in Sezzle and partnered with the installment payments company to offer its buy now, pay later option to select merchants across the Discover Global Network.
BNPL options are proliferating at stores, online, and through cards as fintechs race to roll out the installment choice and merchants embrace it as a vehicle for increasing sales. The trend that started in Australia and expanded in Europe is now gaining ground in the U.S.
A Juniper Research report earlier this year predicted BNPL payments could swell to $995 billion annually worldwide by 2026, up from an estimated $226 billion in 2021.
Meanwhile, venture capitalists have recognized it's a craze that's worth backing. BNPL companies raised a record $1.5 billion in funding in 2020 — a 42% increase over 2019, according to a March CB Insights Report, and the BNPL investment spree has continued this year with the Discover investment in Sezzle, among others. Last year, funding across 20 investments included Klarna raising $650 million.
Though consumers are turning more to buy now, pay later options, they potentially pose a risk to retailers and customers. A September Credit Karma survey found that 44% of respondents used an installment payment service to buy something they needed, but of those, more than a third (34%) have missed one or more payments. Just under three-fourths of respondents said they think missing a payment caused their credit score to drop.
In August, Fitch Ratings reported on the risks of buy now, pay later, noting that borrowers who seek installment payment platforms may have little wiggle room to weather financial hardships. And because these services don't always report customer data to credit bureaus, it's unclear just how much debt these shoppers are accumulating, Fitch said.