Buy now, pay later frees travelers to spend more while managing a budget

Travel in 2024 was more expensive than ever. The cost of a trip is increasingly fragmented; every option and so-called upgrade incurs an additional fee. Want to board a flight early, select your seat, or bring along a checked bag or sometimes simply a carry-on? That’ll cost you. 

As prices and interest rates rise, budget-conscious travelers are turning to alternative payment methods such as buy now, pay later options that split payments into smaller installments, often without accruing interest. Spreading expenses over time provides consumers more flexibility and control over their wallet as well as their travel experience.

Buy now, pay later transactions are expected to increase by $450 billion globally by 2026, according to a July 2024 Statista report. Here’s how providing this alternative payment method empowers travelers and influences their choices at checkout. 

Buy now, pay later optimizes budget management

Savvy spenders are seeking tools to help them stay within their financial means without sacrificing summer vacations and other escapes from life’s stresses. As travelers revise their itineraries to match their budgets and temper concerns around inflation, price is a priority. 

Sometimes top priority.

More than half of respondents in a YouGov study of French people indicated that cost was the most important criterion when booking a trip, and 62% stated that on average they allocated €1,000 or less per person to travel. To finance these trips that are an essential element of French life, many have turned to alternative payment methods: 1 in 4 respondents said they have embraced buy now, pay later.

The payment solution allows consumers to “better manage their purchases, safely, without late fees,” Francis Barel, director of PayPal France, said about the study. PayPal’s mission is to “democratize financial services, to make the daily lives of our consumers easier by offering them adapted and flexible solutions such as interest-free installment payments.” 

Buy now, pay later helps prevent abandoned carts

Though credit cards dominate the travel payment landscape, pay-by-installment plans have gained a foothold. Nearly 40% of those surveyed in a Phocuswright Global Travel Payments Study[1] said their organization already supports installment payments and buy now, pay later options. Another 27% of travel suppliers indicated their organization intends to provide those payment options.[2]

Consumers who use buy now, pay later options have come to rely on it, and may even bail on a purchase if options aren’t available, a PYMNTS consumer survey assessing the payment method’s popularity found. Four in 10 users said they were extremely likely to delay or cancel a purchase or choose a cheaper product if a buy now, pay later option was not available.

More than half of those surveyed said they count on buy now, pay later options to help them keep a cash cushion and preserve lines of credit, and 28% said that the low or no interest associated with those payment plans was important.

Consumers are attracted to alternative payment methods

While airlines and travel retailers that lack alternative payment methods may lose potential buyers, providing buy now, pay later options can have the opposite effect — bringing in new customers. Paying for a trip in installments can make travel more accessible to those for whom it has been out of reach. 

This is particularly true outside of North America and Europe. In Phocuswright’s survey of travel suppliers, traditional and online intermediaries, and technology and payment solution providers, 56% of Asian Pacific companies that offer buy now, pay later said implementation of the payment method attracted new customers. And about 40% of those in the Middle East, Africa, and Latin America said they benefited from an increase in previously unreached consumers, the survey found. [3]

The number of buy now, pay later users will surpass 900 million worldwide by 2027, a Juniper Research study predicted — a significant surge from 360 million in 2022. India is especially primed for growth and is expected to be home to 116 million users by 2027.

Buy now, pay later is not just a tool for the young and tech-savvy; it appeals to consumers across all ages, allowing families to travel together. By 2025, almost half of Gen Z is expected to use buy now, pay later, as well as 40% of millennials, 30% of Gen X and about 15% of baby boomers, Enterprise Apps Today predicts.

Buy now, pay later users spend more and book more often

The buy now, pay later market size for global travel is expected to reach $89.7 billion in 2032 from $42.7 billion in 2022, growing at a compound annual growth rate of 7.9% during the forecast period from 2023 to 2032, according to a September 2023 Market.US report.

The flexibility to pay in installments grants buy now, pay later users the possibility to spend more on add-ons and upgrades — an extra night in a hotel, a room with a view or more leg room on an overseas flight — that allow them to travel in the way they are most comfortable.

Companies surveyed in the Phocuswright study that offer buy now, pay later said customers who use those payment solutions spend more and book more frequently.[4]

Non-Western markets again saw the greatest impact. In the Middle East and Africa, 60% of companies said their buy now, pay later customers spent more, followed by Latin America with 50%. About one-third of companies in North America, Latin America and the Asia Pacific region saw higher spending, the study found.[5]

Airlines and travel merchants that offer the option to pay in installments cultivate loyalty, turning browsers into repeat customers. Globally, a quarter of companies surveyed said buy now, pay later customers book more frequently, according to the Phocuswright study.[6]

PayPal’s analysis of its internal data from October 2022 through September 2023 found that in the U.S., almost 30% of travel and airline shoppers using its Pay Later payment solution are repeat customers.[7]

Buy now, pay later users have higher cart conversion

Consumers browsing online for flights and lodging may be more likely to become airline passengers and hotel guests when they see buy now, pay later as a checkout option.

Merchants in the Asia Pacific region in particular experience a higher conversion rate among buy now, pay later customers. In the Phocuswright study, 44% said customers who use the payment method are more likely to complete a purchase. Companies in North and Latin America, Europe, the Middle East and Africa also get a boost in customer conversion ranging from 22% to 30%.[8]

Budget-conscious travelers may have a bottom-line dollar amount in mind before even navigating to an airline or travel merchant website. Knowing up front that buy now, pay later options are available can influence whether amenities are added along the way to checkout.

Conclusion

Consumers crave choices that allow them to manage their budget. They often spend more on travel when they have the flexibility to pay for trips over time, while still taking advantage of the options and add-ons that make the experience more enjoyable. 

The buy now, pay later market continues to experience global user growth, especially in non-Western regions, making travel affordable to consumers who are on a budget.  

1. Phocuswright, Global Travel Payments Study 2023-2024.  41% of travel retailers, 36% of travel wholesalers/tour operators, and 31% of travel suppliers globally already support or accept buy now pay later payment methods for travel bookings. Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
2. Phocuswright, Global Travel Payments Study 2023-2024.  10% of travel retailers, 13% of travel wholesalers/tour operators, and 27% of travel suppliers globally do not yet but plan to support or accept buy now pay later payment methods for travel bookings. Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
3. Phocuswright, Global Travel Payments Study 2023-2024.  Among companies which offer BNPL, 29% in North America, 29% in Europe, 38% in LATAM, 56% in Asia Pacific and 40% in MEA companies surveyed answered that BNPL has attracted new customers.  Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
4. Phocuswright, Global Travel Payments Study 2023-2024. Among companies which offer BNPL, 24% of customers spend more with BNPL and 17% of customers who use BNPL book more frequently.  Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
5. Phocuswright, Global Travel Payments Study 2023-2024. Among companies which offer BNPL, 36% in North America, 33% in Europe, 50% in LATAM, 31% in Asia Pacific, and 60% in MEA companies surveyed answered that BNPL customers spend more.  Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
6. Phocuswright, Global Travel Payments Study 2023-2024. Among companies which offer BNPL, 26% in North America, 25% in Europe, 22% in LATAM, 31% in Asia Pacific, and 30% in MEA companies surveyed answered that BNPL customers book more frequently.  Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).
7. Based on PayPal Internal Data analysis of all Pay Later travel and online travel agencies partners and merchants from Oct 2022 – Sept 2023.
8. Phocuswright, Global Travel Payments Study 2023-2024. Among companies which offer BNPL, 22% in North America, 27% in Europe, 30% in LATAM, 44% in Asia Pacific, and 30% in MEA companies surveyed answered that BNPL have higher conversion than those who do not use it.  Base: Total (N=795); Supplier (N=108); Wholesaler/Tour Operator (N=101); Retailer (N=568).