How the payments landscape is changing

Everyone’s buying now and paying later. At least that’s what the prevalence of BNPL buttons on online checkout pages would lead you to believe.

Buy now, pay later is point-of-sale financing that allows consumers to make a purchase and pay for an item or service over a set period of time, often without interest. It’s exploded in the past few years, appealing to consumers seeking quick access to credit or those turned off by credit cards. It’s also attractive to merchants — from retailers to restaurants — gunning to increase a shopper’s basket size or close a sale. 

The payment trend first gained traction in Europe and Australia about a decade ago. In the U.S., BNPL took off with the rise of e-commerce during the COVID-19 pandemic. Consumers stuck at home and flush with cash tried the financing tool to buy clothes or home goods. 

More recently, soaring inflation and high interest rates have inspired some shoppers to tap BNPL for everyday purchases, to spread out payments and avoid interest charges.

Using BNPL at checkout tends to be a seamless process for shoppers. That’s helped fuel its growth, especially with digital native generations that expect such experiences. “Being easy to use does matter when it comes to payment options,” said Sheridan Trent, director of market intelligence at The Strawhecker Group.

Initially, BNPL gathered momentum with millennial and Gen Z consumers, many of whom are turned off by credit cards, then it began drawing in other consumers, too. Nearly one-fifth of consumers have used BNPL during the past year, Federal Reserve Bank of New York researchers said in September. 

How it works

BNPL is essentially the opposite of layaway, where buyers could only take home an item once it was paid off. BNPL enables shoppers to obtain an item right away, and then continue paying it off in the weeks or months that follow. 

Consumers can access BNPL options through online checkout integrations on a merchant’s website or through BNPL providers’ apps or cards. Merchants are willing to pay higher fees for BNPL services than they would for credit card acceptance on the belief that customers will be enticed to spend more and complete the sale.

When a shopper chooses a BNPL company as their payment method at the point of sale, either online or in-store, the shopper gives the BNPL provider personal information such as address, phone number, date of birth or Social Security number. Then, BNPL companies typically perform a digital soft credit check within seconds before approving or denying a shopper for an installment plan.

The version of BNPL that’s most widely marketed by providers is an interest-free, pay-in-4 plan. Those offers allow consumers to make an initial payment when they buy an item, followed by three more payments, typically spread over six weeks. 

For a $100 purchase, for example, a shopper would make an initial payment of $25, followed by three more payments of $25, at two weeks, four weeks and six weeks from the point of sale. Consumers make those payments with debit or credit cards, or sometimes through an auto-pay function tied to their bank account. 

While BNPL companies play up their no-fee offerings, some providers do charge interest fees in certain instances, and some may also charge late fees. 

For instance, San Francisco-based Affirm does far more interest-bearing, longer-term installment loan volume than it does shorter-term, fee-free lending. And its interest rate on the former could be as high as 36%. Pay-in-4 loans made up 19% of Affirm’s gross merchandise volume for the fiscal year ended June 30, according to the company’s annual filing with the Securities and Exchange Commission.

Big players in the market

BNPL’s explosion has drawn a number of competitors from across the world to the market, all eager to grab their share of the pie. That includes pure-play BNPL providers such as Affirm as well as banks, card networks and Cupertino, California, tech giant Apple. 

Afterpay, founded in Sydney and now owned by Block, was the biggest player in the U.S. market for the second quarter, based on Bank of America Securities data for monthly active users, though the data didn’t include PayPal. Globally, Stockholm-based Klarna was the BNPL leader by that measure for the period. 

Also jockeying for a piece of the action are Affirm; San Jose, California-based PayPal; Minneapolis-based Sezzle; and Sydney-based Zip. And some smaller competitors have sought to specialize in certain verticals, such as Uplift in the travel arena.

In the U.S., Klarna was second to Afterpay for the second quarter, averaging 3.31 million monthly active users, while Affirm averaged 3.26 million, according to the July Bank of America report. Monthly active users were those who opened the app at least once during the month.

PayPal declined to provide second-quarter figures, but as of the first quarter, 32 million customers had used the company’s BNPL service since its inception in 2020, a spokesperson said.

Meanwhile, Visa, Mastercard and American Express, and banks like JPMorgan Chase and Citi, typically offer existing cardholders the option to break a purchase into specific payments. 

Apple launched its installment lending service, Apple Pay Later, this year – a move that has the potential to shake up a fast-changing market. Trent expects Apple is already gaining market share because the company is intent on making its service easy to use within its digital wallet. 

Amid an intensely competitive environment, BNPL providers are still proving themselves to investors. They’ve largely posted losses in the past, and are under pressure from investors to post profits.

Consultants and professors have said that could be an uphill battle amid current market conditions. BNPL company job cuts have been widespread as the focus has shifted from growth to profits. Klarna posted a $1 billion loss for 2022, while rival Affirm reported a loss of $707.4 million in fiscal year 2022.

What’s next? 

BNPL is here to stay, but it’s likely to become a more regulated, consolidated industry than it is now, said Ed deHaan, a professor at the Stanford Graduate School of Business. “I think we’ll see the weaker firms die out, other ones get consolidated and some version of the product will certainly emerge and continue to be popular,” deHaan said.

Consolidation has already begun. San Francisco-based Block, formerly known as Square, agreed to acquire Afterpay for $29 billion in 2021. Zip bought QuadPay in 2020, and made an attempt to buy Sezzle last year, but later abandoned the deal.

As far as regulation, the Truth in Lending Act applies to the longer-term, interest-bearing BNPL loans, but it doesn’t cover pay-in-4 loans because it only applies to loans with more than four installments or those that add finance charges.

From a regulatory perspective, “it’s kind of a Frankenstein product,” said Michael Guerrero, a partner at law firm Ballard Spahr.

As the Consumer Financial Protection Bureau has taken notice of BNPL, it has expressed concerns about BNPL users taking on too much debt and BNPL providers engaging in data harvesting. 

In addition, the federal agency has urged credit bureaus to take a standardized approach to BNPL, but most of the installment providers still aren’t reporting their loan information to the credit bureaus. Guerrero expects the agency to clamp down on that BNPL-related issue. 

In pursuit of profits, many BNPL providers have expanded the services they offer, including branching into areas such as marketing or shopping assistance. They’ve also introduced new products like debit cards and pushed their services further into brick-and-mortar commerce.

To grow their share of consumer spending, the BNPL providers are also trying to diversify their customer set, partly by courting older, more affluent consumers.

Given higher interest rates and increased costs to fund loans, BNPL companies may increasingly make interest-bearing loans more of a standard in the industry because they’re more profitable, Guerrero said.

As small businesses pursue international expansion, their evolution might involve adopting new payment tools, a recent survey from card network company Visa revealed. 

Small and micro-businesses envision a cashless future, and they’re investing in payment technology as part of their growth strategies, Visa’s survey results showed. In the card network’s global survey of 2,250 small and micro-businesses and 1,500 consumers, more than a third (35%) of business owners surveyed said they are considering accepting new forms of payment as a critical way they can improve their businesses.

About 95% of small business owners planned to become cashless “someday,” and more than half (51%) anticipate going cashless in the next two years.

“Our previous data has shown that small businesses that embraced digital payment technologies over the last few years were more resilient and better able to compete than those who did not,” Jeni Mundy, global head of merchant sales and acquiring at Visa, said in an emailed statement.

To be sure, Visa has an interest in businesses being more digital in their payments schemes because credit and debit cards are often used in those channels. In any case, the COVID-19 pandemic super-charged a worldwide trend toward increased digital payments.

Nearly eight in 10 business owners said they are expanding to new markets to drive growth, Visa said. Among other measures small business owners expect to fuel growth are: bolstering their social media presence (44%), offering new products or services (41%) and increasing marketing investments (40%). 

“It used to be that only big businesses could scale to access customers across the country or around the world, but today’s small business owner can be virtually borderless,” Mundy said in the release. “At Visa, we’re seeing the small business mindset shift from survival mode to growth mode, as SMBs harness the power of digital payments to improve efficiencies, reach new audiences and simply thrive in today’s increasingly digital world.”

The shift toward accepting new payment technology is partly driven by changing consumer behavior, Visa’s survey suggests. More than half (55%) of consumers surveyed said they expect to use digital payments more in the coming year.

Among the factors driving consumers to adopt cashless technology are the convenience and speed they offer as well as the ability to track expenses, Mundy said in the statement. While small and micro-businesses want to integrate new payment forms into their operations, they may face hurdles such as cost, lack of training and security concerns, Mundy added. 

Although nearly half (49%) of consumers told Visa they planned to shop more locally, 72% of shoppers are comfortable shopping with international merchants, the card network reported.

Visa’s latest survey builds upon previous research indicating that small businesses are counting on digital payment acceptance to further growth. The card giant released a survey last year showing that 82% of small and micro-businesses planned to accept digital payment options that year.

Other research has illustrated the decline of cash and the ancillary impact of dwindling cash use. 

A Gallup survey released last year found that 13% of respondents use cash for all or most of their purchases, down from 28% five years earlier. Plus, June data from Euromonitor International indicated ATMs declined to 451,500 last year from 470,000 in 2019.

Though business owners want to transition to cashless, legislators are weighing whether to prevent them from doing so. In June, Congress members introduced bills in the House and Senate to prohibit businesses from refusing to accept cash for in-person transactions.

The legislation is meant to prevent discrimination against unbanked and underbanked Americans who rely on cash to pay for their essentials, according to bill authors Representatives Donald Payne Jr. (D-N.J.) and John Rose (R-Tenn.) and Senators Bob Menendez (D-N.J.) and Kevin Cramer (R-N.D.). 

Meanwhile, local government officials are having a similar debate. In Atlanta, for example, Atlanta City Council members met Wednesday to discuss a proposal that would require retail businesses to accept cash payments, The Atlanta Journal-Constitution reported.

As interest in the metaverse has taken off, interest in digital currency has also grown. The crypto market has seen a whirlwind of change, with many retailers beginning to accept digital currencies in recent years. In 2022, companies like DTC retailer Alo Yoga and Gucci expanded their payment options to include cryptocurrency. 

The crypto hype struck enough of a chord that some retailers began to recruit specialists in the space. Just a year prior, Walmart was in search of a leader for digital and cryptocurrency products. The job posting described the position as someone who would focus on digital currency strategy, identify customer needs and search for related investments and partnerships. 

Despite interest in crypto, some retailers have put an end to their crypto offerings or backed away. Many retailers expanded their payment options to include crypto last year, but the discussion around the payment method has since quieted, with fewer announcements from brands.

Martha Bennett, vice president and principal analyst at Forrester, said that crypto still remains volatile. The market has little broad interest with almost no new money coming in, Bennett says.

“[Cryptocurrency] didn't solve any problems in payments,” Bennett said. “People will always say, ‘Yeah, but it's instant, and everything,’ but that's much more easily and cheaply replaced with a real-time payment system.”

“So, there isn't really a reason for retailers to even say you can pay with cryptocurrency here, unless they can see an uplift from the cryptocurrency community and I don't think there's so much of that,” Bennett said.

After a rocky few years of crypto in retail, here is what three retailers' approach to the technology says about the market.

Pacsun

In 2021, Pacsun dubbed itself the first youth fashion retailer to accept cryptocurrency through Bitpay, a blockchain payment provider. 

Pacsun’s decision to accept crypto stemmed from its target consumer Gen Z. The company also noted at the time of the announcement that its digital sales doubled from the previous year. Gen Z’s proficiency with tech and social media platforms means the generation is often one of the first to hop on digital trends. 

Not every retailer targeting Gen Z also accepts crypto. American Eagle, another retailer in the young adult fashion sector said it would not accept crypto for NFTs in 2022. At the CommerceNext conference in June last year, Chief Marketing Officer Craig Brommers said its 15- to 25-year-old customer wasn’t ready for cryptocurrency.

When asked if the retailer still accepts cryptocurrency, Pacsun declined to comment. A list of payment methods on the retailer’s website includes a passing mention to BitPay, but it is not specifically listed as an available payment option.

As some retailers back away from crypto, it’s possible Pacsun’s target audience wasn’t a match.

When asked about the demographic of typical crypto users, Bennett said the data shows males aged 25 to 35, noticeably older than Pacsun’s target audience. Bennett noted that Gen Z is less interested than the next generation up, though it's hard to get samples of statistical significance on crypto users.

“Almost stereotypical,” Bennett said. “I mean, yes, there are sprinklings quite widely around the age groups. It's often those that do use cryptocurrency for making a payment, it is mainly males between 25 and 35 and some in the next 10-year age group.” 

GameStop

Even some retailers that dove head-first into crypto have since backed away. For companies with other financial distractions, an investment in crypto isn’t certain to provide a return.

GameStop beta launched its digital asset wallet, dubbed GameStop Wallet, in May 2022. It allowed consumers to store, send, receive and use non-fungible tokens and cryptocurrency. The company launched the beta version of its NFT marketplace a few months later in July 2022. 

Now-CEO Ryan Cohen initiated the company’s push to transform into a technology business during his role as board chairman. Cohen bought a financial stake in GameStop in 2020 and became an activist investor in 2021 with a mission to turn the retailer into a tech company after a history of what Cohen called “secular decline.”

This June, GameStop’s former CEO Matt Furlong was terminated and Cohen was named executive chairman before becoming CEO in September.

In August, however, the electronics retailer announced its decision to end support for its crypto wallet, “due to the regulatory uncertainty of the crypto space.” On Nov. 1, all crypto wallets through the retailer are set to be removed.

GameStop has struggled financially over the years, with sales in 2022 down 1.38%. However, for the first time in two years, the company posted a quarterly profit in March this year. For the second quarter, it reported net sales of about $1.16 billion, up from $1.14 billion year over year.

Like GameStop, Overstock is another retailer that took a part in crypto but has since backed away a few years ago. Overstock was the first online retailer to accept cryptocurrency bitcoin in 2014, an initiative pushed by company founder Patrick Byrne. 

After the company lost millions of dollars betting on blockchain, Byrne left in 2019. His replacement, company veteran Jonathan Johnson, turned the retailer’s attention away from blockchain initiatives and back to just selling furniture. 

Tag Heuer

Luxury retailers were big on accepting crypto and Tag Heuer joined that crowd in May 2022. With the brand’s announcement, Tag Heuer, owned by LVMH, began accepting 12 cryptocurrencies on its U.S. website.

The brand also invested in NFTs through its digital watches. According to the company’s site, customers can display their digital asset collection on a Tag Heuer Connected watch with verified proof of ownership by connecting their crypto wallet to the watch. The digital watch displays the artwork at the owner’s direction.

Around the same time Tag Heuer made the move, Kering announced that Balenciaga and Gucci would also accept crypto payment options.

Tag Heuer is still accepting crypto, according to the terms and conditions on its site. 

Bennett said the luxury sector is more likely to accept crypto, given its customer base. Especially if a company is gold-backed, meaning its digital assets are backed by the equivalent price in physical gold.

However, some luxury companies have stepped away from crypto. Bennett gave Tesla as an example of a luxury retailer that has somewhat backed away from crypto. The company invested $1.5 billion in bitcoin in February 2021, according to sister publication CFO Dive. 

Tesla CEO Elon Musk and CFO Zach Kirkhorn even added the titles “Technoking of Tesla” and “Master of Coin,” respectively, to their titles at the time.

Currently, Tesla only accepts Dogecoin and only on eligible items with the cryptocurrency logo, according to its site. In 2021, the retailer was accepting bitcoin for car purchases but suspended the initiative citing the rapid increase of fossil fuels used for bitcoin mining. 

Retailers are still investing in the metaverse and crypto despite active skepticism and challenges in the space. In Bennett’s opinion, there are still uses that exist for crypto, but the technology needs more regulatory clarity.

“I think there needs to be some decisions about what [crypto] wants to be,” Bennett said. “Because we keep going round and round in circles with this, we need regulatory clarity… it sounds really boring but it needs to clean up its act… we need to get away from this illusion that technology alone can solve some really hard issues… so it's getting away from some of the, in some cases, it’s just idealism or utopianism.”

Crypto has had a chaotic year. 

“I think after the market rout in the last week or two, I’m not sure any of us are truly ready for cryptocurrency,” said American Eagle Outfitter’s Chief Marketing Officer Craig Brommers at the CommericeNext 2022 conference last month. The retailer made the decision not to accept cryptocurrency as a form of payment when it was developing an NFT collection last year.

The crypto market crashed in May, with extremely volatile trading trends. Consumer Financial Protection Bureau Director Rohit Chopra even cautioned businesses, telling Bloomberg that stablecoins might not be ready for payment. Nonetheless, plenty of retailers have announced they are accepting crypto as payment. Brands such as Gucci, Balenciaga, Alo Yoga and Tag Heuer are some notable companies that entered the crypto game recently.

Even brands within the same arena are thinking about digital currencies differently. Pacsun and American Eagle Outfitters are both betting big on digital transformation as a way to attract and retain a youthful audience. Both brands have been involved in virtual shopping and gaming experiences by launching initiatives in Roblox. Pacsun released mall rat-themed non-fungible tokens this year and auctioned some off at the immersive virtual shopping event ComplexLand 3.0. American Eagle Outfitters also released an NFT collection last year, and recently created an apparel collection with designs from NFT creators. 

The key difference in both brands’ NFT launches: Pacsun sold them in exchange for crypto and American Eagle Outfitters did not. 

In October of last year, Pacsun started accepting crypto as payment through BitPay, dubbing itself as the first “youth fashion retailer” to do so. 

"The Gen Z audience, our primary consumer, is very tech oriented, and we dedicate a lot of our efforts towards social media and ecommerce to align with their lifestyles and resonate with them on a more personal level,” Michael Relich, co-CEO at Pacsun, said in a statement at the time. “Seeing their increasing desire towards cryptocurrency, it was clear that we needed to adjust and offer BitPay as another payment option, to further instill their confidence in us as one of their go-to retailers that truly listens." 

American Eagle Outfitters thinks otherwise.

“When we thought about our 15- to 25-year-old customer, the reality is they were not ready for cryptocurrency,” Brommers said at CommerceNext.

Who is using crypto? 

Data paints the picture that usage of crypto, whether for investment purposes or as a form of payment, is very different across gender and age.

A survey released by the Pew Research Center in November 2021 showed that men are twice as likely to say they have used crypto compared to women. Looking at the age group of 18- to 29-year-olds, 43% of men said they’ve invested in, traded or used crypto. This compares to only 19% of women in the same age group.

Crypto currently attracts a younger audience for both men and women, which is likely of interest to Pacsun and American Eagle Outfitters. Thirty-one percent of 18- to 29-year-olds surveyed have used crypto in some capacity, compared to only 8% of those 50 to 64 years old.

Using crypto for investment purposes or through the purchase of an NFT is quite different then using it as a form of payment, though. A May 2022 report by The Federal Reserve Board says that crypto used for financial transactions or purchases is much less common than its usage for investment. 

The report found that in 2021, only 2% of U.S. adults used crypto for payment over the prior 12 months. Those who used crypto only for investment purposes tended to have a higher average income, had a relationship with a traditional bank and had retirement savings compared to those who used crypto for payment purposes. 

But this is the current demographic, and won’t necessarily stay the same over time.

“When we look at the totality of the research, no doubt that the group that has been more active in adoption of cryptocurrencies and stablecoins has skewed younger,” Deloitte U.S. Banking and Capital Markets Payments Leader Zachary Aron said in an interview with Retail Dive.

“And there's also a correlation that the younger demographic ... tends to have been more underbanked overall as well,” said Aron. 

When asked about how retailers should consider that data in their decision making, Aron said, “I wouldn't necessarily evaluate it just on the premise of accepting crypto or not, but really on the premise of who's my customer base that I'm trying to attract.”

Deloitte recently released a report on its survey of 2,000 senior executives at U.S. retail companies to examine interest and investment into crypto as a form of payment. The report found that 64% of merchants surveyed indicated that their customers have a significant interest in crypto payment options, and 83% expect that interest to grow over the next year.

Based on this data, many companies are looking at the long-term role of crypto in retail transactions, perhaps expecting the current user demographic to grow and change over time.

Crypto users aren’t too swayed by market fluctuations, according to a study by Gartner’s Software Advice. Its 2022 Cryptocurrency in Ecommerce Survey, which surveyed 596 U.S. consumers who have used crypto as a payment type once per month in the past year, found that over half of respondents plan to spend more using crypto in the next year. Only 29% of respondents who intend to spend more with crypto in the coming year are deterred by its value fluctuations.

That said, the report cautioned small- and medium-sized businesses from jumping into crypto payment too soon, stating that some perceived consumer benefits for this payment type don’t necessarily help retailers. For example, the idea that crypto transactions are private isn’t completely true since businesses need to report any changes in crypto value as they are subject to capital gains taxes. Additionally, the idea that transaction fees are low doesn’t always remain true for merchants since the fees change over time, per the report.

American Eagle Outfitters’ Brommers appears to be taking the short-term view though, based on what is known about the current active crypto audience and how volatile the digital currency market has been this year. Pacsun, on the other hand, is likely looking at the long-term potential of widespread crypto adoption.

“We certainly think that there are attitudes around digital currencies that are obviously influenced by the investment side of the digital currencies space,” Deloitte’s Aron said. “Businesses are taking that longer-term view, they do recognize that there will always be short-term ups and downs. But the longer term aspect of digital currencies being a part of the payment space and how it can enhance the customer experience is something that likely is going to endure.”

PayPal is counting on bigger profit margins from a revamped approach to selling payment services to small and mid-sized merchants by way of a new end-to-end payments system, the company’s executives said at a special management meeting with analysts and investors Thursday in New York.

That new offering, part of its unbranded processing segment, will replace what company officials have called a “suboptimal” product called PayPal Pro. Merchants can even offer consumers the ability to pick rivals’ payment options through the service, including Apple Pay or Google Pay.

The San Jose, California-based company said merchants can access the new service directly and through independent vendor partners. PayPal initially outlined the new service, called PayPal Complete Payments, in April and plans to offer it with e-commerce and in-store capabilities.

The new service, which PayPal has nicknamed PPCP, is an attempt to bring small and mid-sized merchants the processing muscle of PayPal’s unbranded Braintree unit, which caters to larger global merchants. While Braintree can provide the customization that larger clients want, PPCP will be a simpler off-the-shelf offering. 

The company’s unbranded processing overall, for all company sizes, accounted for about a third of PayPal’s volume last year, the company said.

While larger merchants can typically negotiate lower processing pricing because their transaction volumes are higher, smaller merchants often have less wherewithal to access those lower rates. “For small merchants, it’s because they don’t have the pricing power of the very largest merchants,” Peggy Alford, PayPal’s EVP of global sales and merchant services, said during the presentation. That allows PayPal to achieve higher profit margins.

PayPal launched the new PPCP service in the U.S. in the first quarter, and will expand it into other markets, including outside the U.S., as the year progresses, Gabrielle Rabinovitch, the company’s acting CFO, said at a Barclays investor conference last month.

The predecessor product, PayPal Pro, “has been in our portfolio for about 15 years and it really does not represent best in class, so it’s suboptimal in terms of what an SMB would need today and what we would even view as competitive in the market,” Rabinovitch said at the Barclays event. “The unit economics of that business are just far more attractive” than with larger enterprise merchants, she added.

The SMB market is valued at about $750 billion, analysts at the financial firm William Blair said in a note Thursday to clients. They expect PayPal to begin marketing the service as the year progresses.

In addition to the SMB strategy, the company is also planning to increase its margins by expanding the unbranded business generally in Europe, Asia and Latin America, specifically Brazil, with cross-selling of its value-added services, including sending money to multiple recipients and risk management, Alford said at the event Thursday.

“We believe Complete Payments offers more attractive take rates and gross margins than PayPal’s enterprise-focused Braintree offering, which could over time offset some of PayPal’s transaction margin pressure,” the William Blair analysts said in their note.

While PayPal told analysts during the presentation that it’s taking payments processing share from some competitors, that’s probably mainly with respect to larger merchant clients, and not as much with respect to smaller merchants, RBC Capital markets analyst Daniel Perlin said in a note to investment clients Thursday.

Winning new SMB business may not be a sure thing though, in light of reports of weakness in that market. At the mega-processor Fidelity National Information Services, known as FIS, the company’s SMB demand in e-commerce at its Worldpay merchant unit has been “challenged this year,” with headwinds from “attrition and compression,” according to a Wednesday note from Baird Equity Research, the research arm of the financial firm Robert W. Baird.

Aside from an introduction to the hour-plus-long presentation, outgoing PayPal CEO Dan Schulman mainly let other members of PayPal’s executive suite do the talking. He noted in his preamble that it might be his last time meeting with the analysts. Other than that, the company didn’t provide new details on the date of his exit.

Last month, calls for the company to accelerate Schulman’s retirement surfaced, suggesting that waiting until the end of the year for the CEO to exit was too long.

Buy now, pay later provider Affirm said in a company web post Thursday that it will divest its Returnly unit, a returns payment platform it acquired two years ago. The “sunsetting” of that platform will occur by early October, the company said.

Affirm purchased Returnly for $300 million in June 2021. An Affirm spokesperson said the company did not sell Returnly and declined to comment on whether Affirm will be writing off the business. “The vast majority of Returnly employees have already been re-deployed to other departments within Affirm,” the Affirm spokesperson said, declining to identify the number of employees Returnly had.

Alternatively, San Francisco-based Affirm is now increasing its work with another returns management company, entering a strategic partnership with Loop Returns, the BNPL provider said in the post.

Two years ago, Affirm said its acquisition of Returnly would enable Affirm customers to easily return goods purchased using the company’s BNPL financing, through self-service online returns. 

Now, Affirm has “made the decision to divest our Returnly business and are also entering into a new strategic partnership with Loop Returns,” Affirm Chief Revenue Officer Wayne Pommen wrote in Thursday’s web post. 

Loop, a returns partner for Canadian e-commerce company Shopify, will now be the “preferred returns provider” for merchants currently using Returnly, Pommen wrote. Affirm and Loop will work to transition Returnly merchants to the Loop platform by October. About 1,500 merchants use Returnly’s services, while Loop serves about 2,200 merchants, according to a Loop web post Thursday.

Shuttering Returnly and partnering with Loop will allow Affirm “to take an even deeper focus on driving strong growth and profitability in our core business,” among other pursuits, Pommen noted in Affirm’s post. Loop did not respond to a request for comment. 

That focus on profitability has become more intense for BNPL providers such as Affirm as the U.S. economic environment has worsened on some fronts this year. Affirm executives have said the company aims to become profitable, on an adjusted operating income basis, by the end of the fiscal year ending June 30. Affirm reported a $205.7 million loss in its fiscal third quarter ending March 31. 

Earlier this year, Affirm cut about 500 employees and exited Australia.

Dive Brief:

E-commerce giant Amazon said it is expanding its buy now, pay later offering beyond its website and app, by making it available through the Amazon Pay tool on other retailers’ sites, according to an email sent to sister publication Payments Dive. A spokesperson didn’t immediately respond to a question on when that change occurred.

“Amazon Pay merchants now have yet another way to seamlessly reach new customers, offering them more choice and convenience in how they pay,” Amazon Pay Director Omar Soudodi said in the email.

Customers can use Amazon Pay’s equal monthly payments option for online checkout purchases of $50 or more and split payments over six or 12 months with 0% interest. This BNPL option is only available to customers using Amazon’s Visa credit cards.

The equal monthly payments offering is now available at tens of thousands of other online stores, including Lenovo, Tennis Express and Authentic Watches, according to the email. The company first began offering BNPL financing in 2018, according to a spokesperson.

Millions of customers have used the BNPL option when it was available only on Amazon.com, according to the company. The new feature doesn’t require any change to e-commerce sites currently using the Amazon Pay checkout button.

The Seattle-based online retailer has a suite of existing payment plan options. In 2021, it allowed BNPL company Affirm as a checkout option on the Amazon website.

Coming soon to more physical stores will be Amazon’s palm recognition and payment system. Last month, the company announced plans to roll out its Amazon One biometric service to every one of its Whole Foods grocery stores.

Payments company Klarna on Wednesday introduced 13 new developments to improve shopping on the app, according to a company press release. The company added a shopping lens and a barcode scanning feature, and expanded shoppable videos to Europe.

Klarna’s shopping lens allows users to take a photo and see where to buy the items in the photo. AI translates what’s in the image to a searchable term and displays the results. With the search and compare tool, the app will also look for the best deal online. The app also shows users similar items to what’s in the photo available online. 

Users can also now scan barcodes to see product information in the Klarna app. For about 10 million products, users can scan the barcode and find customer reviews, different colors and variants of an item available online and price comparisons. With the app’s camera scanning feature, customers can also pay by scanning a QR code at integrated retailers.

Klarna launched the new features as a part of its Spotlight Fall launch, the company’s bi-annual product showcase. Klarna also added a cashback program, an enhanced purchased protection policy, sustainability search filters and more.

“Just like the internet gave everyone access to information, AI gives everyone access to intelligence, context and personalization,” Klarna CEO and co-founder Sebastian Siemiatkowski said in a statement. “At Klarna we’re using this to bridge the gap between the physical and digital world, connecting how humans get inspired with how computers search.” 

The expansion of shoppable videos builds on the company’s previous AI initiatives, such as when it added a discovery shopping feed to the app. The feed now includes shoppable videos including unboxings, reviews, product drops and tutorials from brands and creators. Items featured in the video can be shopped directly from there.

Klarna said its AI-powered recommendation engine has contributed to an increased average viewer time of 60% and increased click-through rates of 25% for users in the United States.

Retailers are featuring AI more as the tech advances in popularity and capability. Walmart is a key retailer using AI. CEO Doug McMillon in a Q2 earnings call said that the company’s AI strategy includes personalization for customers, associate operations and supply chain optimization, sister publication CIO Dive reported.

The company kept its word and announced last week that it had incorporated generative artificial intelligence to improve its search capabilities, assist shoppers with complex purchases, help customers prioritize product features and show review summaries. Walmart is also using AI to test a spatial design tool to help customers design rooms based on budget, theme and more.

Google Cloud also introduced tech powered by AI allowing retailers to use imagery to track items on store shelves.

Walmart on Friday will celebrate the grand reopening of 117 stores representing over a half a billion dollars in capital investments across 30 states, the company announced Monday. Walmart is investing more than $9 billion over two years to modernize over 1,400 stores across the U.S. 

The retailer said it has revamped the stores with better layouts, wider product selections and various technological improvements as part of its “Signature Experience” initiative, which aims to enhance the shopping experience for customers. 

Among the improvements the retailer has made to its stores are interactive corner displays, larger pharmacies, rooms for nursing parents, QR codes and digital screens with helpful information for shoppers and a Dollar Shop at store entrances with seasonal products.

Walmart is tapping into its network of brick-and-mortar locations to better serve customers.

Walmart U.S. CEO John Furner in April called the company’s stores “the key nodes” in its omnichannel operation. Chief Financial Officer John David Rainey also at that time said that nearly 90% of Walmart’s capital expenditures will be in “high return areas like e-commerce, supply chain and store investments,” over the next five years. 

Friday is the largest single-day rollout of re-grand openings in company history. Other store enhancements include larger online grocery pickup and delivery areas and a new grab-and-go section for quick meal and drink options. Stores also have refreshed exteriors and interiors, more shopping carts and a new checkout design that was based on customer feedback. 

In February, Walmart announced plans to shutter two stores in Arkansas and Illinois that only served pickup and delivery orders. That month, Rainey said during a fourth quarter earnings call that Walmart’s store-fulfilled deliveries nearly tripled over the past two years. The retailer said more than 3,900 out of its 4,717 stores now offer same-day delivery. 

“With nearly 90% of the U.S. population living within 10 miles of a Walmart, we understand how important our local stores are to customers and communities, and these construction investments allow us to create more local jobs and make it easier for our associates to get customers what they want, when they want it,” Furner said in a statement about the reopenings.