BNPL (Buy Now, Pay Later) or Point-of-Sale Lending or Installment Payments is a short-term financing solution that enables travelers to make a booking immediately and pay for it in installments over time. Unlike traditional credit cards, BNPL is incorporated directly into the checkout flow as a variation of the payment method, with immediate credit decisions and frequently interest-free terms to alleviate the financial friction of expensive travel purchases.
In retail, BNPL is being used for $50 shirts. In travel, it solves a much bigger problem: cart abandonment on high-value transactions.
The Average Order Value (AOV) for a family vacation can easily be over $3000. Many consumers have the income to pay this over three months but do not have liquid cash to pay it all today.
A misconception is that the airline or hotel takes the risk of the customer not paying. This is incorrect. The risk is completely with the BNPL Provider (e.g., Affirm, Klarna, Uplift, Fly Now Pay Later).
Implementing BNPL is not only a financial integration but also a technical one.
With layaway, you pay for the product in installments and receive it when you have finished paying. With BNPL, you get the product (the trip) right away and are expected to make a payment later.
It depends. Most BNPL providers use a soft pull, which does not affect credit scores. However, missed payments or applications for large and long-term financing options could lead to a hard pull or a report to credit bureaus.
This is complex. The airline refunds the BNPL provider based on the rules of the ticket purchase (e.g., $1,000 is refunded). The BNPL provider then cancels the customer’s remaining installments and refunds any money that the customer has already paid. If the ticket was non-refundable, the customer still has to pay the BNPL provider.
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