What Apple’s BNPL offering means for travel

Offering consumers the option to buy now and pay later for travel products became an attractive model for travel providers amid the pandemic.

Travelers – eager to be on the move again – wanted flexible and accessible payment options that reduced the stress of buying big-ticket items without paying interest.

Travel merchants, meanwhile, were able to attract new customers as well as increase conversions and average order values by allowing travelers to pay in installments.

According to iSeatz, a buy-now-pay-later option at checkout increases conversion rates 20 to 30% and lifts average ticket sales 30 to 50%.

And travelers don’t mind spending more, either: According to Amadeus, 68% of global travelers say buy-now-pay-later would encourage them to spend more than usual on summer travel, while 49% say they would be more likely to buy ancillary services if buy-now-pay-later was offered.

Fintech brands such as Affirm, Uplift and Fly Now Pay Later that were providing buy-now-pay-later options for travel purchases prior to the pandemic saw an upswing in business over the past two years.

Affirm – one of largest players in the space that counts American Airlines, Expedia and Vacasa as partners – went public in January 2021 at a $24 billion valuation, while California-based Uplift says it grew its partnership base from 60 merchants to more than 300 and U.K.-based Fly Now Pay Later raised a $75 million investment round in 2022.

Travel providers including Delta Air Lines, Agoda and CheapOair also began offering a buy-now-pay-later option amid the crisis.

For the most part, healthy competition seemed the name of the game until one of the biggest brands in the world – Apple – announced its entry into the market.

Checking the competition

Apple Pay Later, unveiled in early June, allows consumers to pay off a purchase in four installments, each installment paid every two weeks. Apple is integrating MasterCard’s installment program to process each Apple Pay Later purchase, and merchants that already accept Apply Pay will be able to automatically accept the option when it launches this fall.

Following the announcement, Affirm’s stock dropped 5%, and PayPal quickly released news of a new buy-now-pay-later product, called PayPal Pay Monthly, to supplement its existing Pay in 4 program.

When asked about Affirm’s stance on Apple entering the playing field, a spokesperson says: “Consumers, especially now, are looking for more transparent and flexible alternatives to credit cards. Affirm has offered this for nearly a decade through personalized payment plans with term lengths ranging from six weeks to 60 months. By underwriting every single transaction, we empower consumers to responsibly pay over time and help merchants drive growth, turning browsers into buyers. 

“Today, we have more than 200,000 integrated merchant partners and consumers can use Affirm at virtually any retailer via the Affirm app. Even as more players join the movement we started, the prize remains massive, and Affirm is well-positioned to win. We simply don’t think anyone can do what our team and our technology can do.”

Similarly, Uplift chief commercial officer Tom Botts believes Apple’s move advantages travel-specific players in the space: “It is certainly a vote of confidence for the relevance and importance of buy-now-pay-later. Industry giants [Apple and PayPal] are doubling down on the space because they see the value it brings to consumers and to their business. I think it also shows the industry is still open for other players – we haven’t moved into a winner-take-all scenario. 

“We’ll see what their product looks like but we know that a typical ‘pay in four’ model simply does not work in travel given the large average order values – taking a $1,000 cruise and allowing a consumer to pay $250 every two weeks does not drive affordability or conversion. But a 12-month loan certainly does.”

Jean-Christophe Lacour, head of merchant services, payments at Amadeus, says that there has been a steady trend toward fintech for many years, so it’s to be expected that consumer-facing technology companies like Apple are launching pay-by-installment services.

But specialist buy-now-pay-later providers have developed services specifically for the sector. “Such specialists represent a strong choice for travel providers seeking to offer buy-now-pay-later at checkout, and travelers making payment. They know the business and what drives people to select a pay later option, for example, in travel it’s often a desire to upgrade a flight or holiday.”

Overall, says Botts: “The buy-now-pay-later space is crowded and competition forces those with subpar products and a poor customer experience to get weeded out. Uplift’s expertise in travel allows us to provide a superior product that drives significant value for our travel partners and users.”