Having a general understanding of world markets and how they differ from our own could be advantageous to businesses, because today’s consumer is more likely to make purchases from abroad than in the past. Awareness of how buying trends differ around the world can be beneficial – and give added perspective to how providing customers with a buy now, pay later (BNPL) option adds value.
The US has a strong affinity for credit. It has been part of the fabric of our commerce for decades. And while younger generations of Americans are taking a vastly different stance on the use of credit and are breaking with old habits, America is still a country where credit cards remain a popular choice of payment – and where falling into debt is less feared than in most other countries around the world. Not all nations are as attached to their credit cards as we are. Certainly, we aren’t the only country where they are used on a regular basis, but we tend to be more comfortable with credit than anywhere else – even when we aren’t able to pay off our debts as soon as we should. What follows is a brief overview of how the use of credit is perceived in three diverse markets around the world: Canada, Germany and India.
Canada
The situation in Canada is very similar to the US. Canadians are just as quick to grab their credit cards as Americans, and like Americans, they are likely to fall into debt. Canadians are avid users of credit cards. On average, 83%* of Canadians own and use credit cards as compared to 66%* of Americans. This is surprising, as by comparison, Canadian credit cards are far less favorable to their users than their American counterparts, with annual fees being common, higher interest rates the norm, and less generous rewards systems.
Germany
In Germany there is a completely different attitude toward credit. Germans, plain and simple, prefer cash and its tangibility. Even though Germany has the strongest economy in Europe, the German population remains loyal to solid, tactile cash, and the sense of security and control over their budgets they feel it gives them. When it comes to online purchases, direct debit is the preference. Although Germans avoid using credit cards, about 53%* of Germans have one. They tend to reserve them for travel, when it becomes a convenience and a “necessary evil.” Frankly, the average German’s rejection of credit cards is not entirely rational; it is feeling driven. According to Jessica Reps (UX/UI Lead Europe at Sezzle), “A credit card feels like a stranger, complicated and slow.” German merchants tend to be as loathe to accept credit payment as their customers are to use them; mainly because of the high fees they incur. “Fast” and “contactless” became the argument used in favor of credit cards during the pandemic. And the Covid-19 era has seen an increase in use of credit cards in Germany, although not as much as would seem likely: cash is still responsible for 75%** of German transactions.
India
India is a fast growing market. Although still a fairly low percentage of the population use credit, it is on the upturn. Historically, the major reasons for India’s low use of credit has been the fact that India is risk-averse: spending money you don’t have in hand is frowned upon. Recently, the government made a push to get more people to open bank accounts, and now roughly 80%*** of the population have one. As of November 2020, about 3%* of the population owned a credit card, but between 2020-2025 this is predicted to grow at a CAGR of 25%****. Although this is a far cry from the norm in the United States, credit use is increasing at a steady pace. And, as elsewhere, the pandemic has seen a further change in the payment landscape. Digital transactions are being encouraged, and buy now, pay later is rapidly taking hold. In fact, BNPL products are projected to be one of the biggest beneficiaries of growing online shopping trends in India.
As views on credit vary widely around the world, so will the perception of buy now, pay later. The diverse attitudes toward credit – both its merits and its downfalls – have a direct correlation with how BNPL plays in various markets around the world. In a young market, such as India, the door is wide open for BNPL to compete from the ground up; whereas in Germany, negative attitudes against credit cards can play in BNPL’s favor as a welcome alternative to the more risky credit card. Canada’s less favorable credit card system plays well to BNPL, and the changing attitudes of young Americans create open ground for BNPL to compete against the culturally ingrained use of the credit card in the US. At the end of the day, every country has its own challenges when it comes to credit, and varies according to the perception of each country’s citizens toward it. And these perceptions can have a positive and beneficial impact on how Buy Now Pay Later is received by prospective users in markets worldwide.
Sezzle is available in the United States, Canada, Germany, and India today and is expanding into new markets in 2021. Sezzle differentiates from its BNPL competitors by empowering the next generation through its primary transparent and inclusive payment option – Sezzle Up – which enables consumers to take control and be responsible for their spending. This approach provides a graduated path toward improved credit along with continuous financial literacy education. Sezzle is the only buy now, pay later company that is a registered Public Benefit Corporation with a commitment to social and green initiatives, including planting trees, carbon offsetting, awarding scholarships and ethical collaborations. In pursuit of its ‘Payments with Purpose’ mission, Sezzle has partnered with Trees for the Future to plant a tree for every new Sezzle user in 2021.
Call Sezzle today to learn more about how to launch a buy now, pay later solution for your business.
*https://www.theglobaleconomy.com/rankings/people_with_credit_cards/#Canada
**https://www.npr.org/2020/08/11/899343670/pandemic-or-not-germans-still-prefer-cash
