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Katapult Survey: Consumers with Nonprime Credit Anticipate Using Flexible Payment Options

More than Three-Quarters of Consumers with Nonprime Credit Anticipate Using Flexible Payment Options This Holiday Season, New Katapult Survey Shows.

Katapult survey shows consumers want Buy-Now-Pay-Later and Lease-To-Own payment options to purchase gifts for themselves and immediate family members. This holiday season, retailers hoping to appeal to customers feeling the pinch of inflation will need to offer flexible payment options, such as buy now, pay later (BNPL) and lease-to-own (LTO), according to a new survey from Katapult, an omnichannel lease-purchase platform that provides alternative payment solutions to merchants and consumers. The data showed that more than three-quarters of consumers with non-prime credit scores or lower (78%) would use a flexible payment option to purchase gifts for themselves or others this holiday season, if offered by the online or physical stores where they shop.

Despite rising prices and interest rates, the Katapult survey showed that this holiday season, more than one-third of all respondents (32%) expect to spend more than last year on gifts. 36% of all respondents expect to spend between $400-$1,000 in total. Shoppers are on the hunt for deals, especially on big-ticket items. Many consumers with non-prime credit scores or lower take advantage of discounts this time of year to buy home electronics (54%), home furnishings (31%), and home appliances (24%), for themselves or others, according to the survey.

“The holidays can be expensive even in rosier economic times, and that’s likely to be even more true this year with consumers paying more for less due to higher prices,” said Orlando Zayas, CEO at Katapult. “Without the flexibility to split larger payments over time, many non-prime shoppers will have difficulty affording items such as video game consoles, laptop computers, TVs, and other popular gifts for themselves or others.”

In 2022, American consumers are feeling the pinch of rising interest rates and the climbing cost of goods. Those living paycheck to paycheck, without credit, or with non-prime credit are especially vulnerable to the effects of inflation. Many of these consumers with non-prime and lower credit scores pay for most of their online or in-store purchases with debit cards (85%) or mobile payment apps such as Google Pay, Apple, or Samsung Pay (51%). However, they have fewer affordable payment options available to help with bigger-ticket purchases.

Payments Emerging as a Key Differentiator for Retailers

According to the survey, more than half of Americans (54%) are more likely to shop with a merchant that offers flexible payment options, such as lease-to-own or buy now, pay later. Flexible payment options are often the only way for non-prime consumers to obtain necessary durable goods, especially as many traditional lenders tighten their lending criteria or increase their interest rates.

As a result, nearly two out of three Americans (62%) say that higher prices due to inflation are causing them to delay or skip purchasing big-ticket durable goods. The ability to shop from merchants where they can stretch their dollars further and spread out their payments over time with lease-to-own options can make a significant difference.

In fact, nearly a quarter (24%) of respondents said they feel relieved when they see a merchant offers flexible payment options. More than one-in-five (22%) feel valued, and 16% are curious.

“Consumers today are choosier, and they want to feel seen and valued,” said Zayas. “They are more loyal to merchants that understand and accommodate their needs. Offering flexible payments is one-way retailers can do that, especially during the competitive holiday shopping season.”

Younger consumers are particularly eager to use alternative payment solutions this holiday season and will specifically seek out retailers that offer those options. According to the survey, 60% of Gen Z and millennials would be more likely to shop from a merchant that offers flexible payment options, compared to 45% of their Gen X and older counterparts. Additionally, younger consumers are slightly more likely (6%) to have used lease-to-own previously.

“We’ve found lease-to-own and other flexible payment options appeal to younger consumers since they are more likely to pick up on newer trends, less likely to have established credit, warier of incurring credit card debt, and often struggle with larger purchases since they have yet to hit their prime earning years,“ said Zayas. “By offering flexible payment options, retailers can reach younger customers now and earn their loyalty for years to come.”

Katapult surveyed 1,184 adults in the U.S. whose credit scores qualify as non-prime (660-601), subprime (600-501), and deep subprime (500-300). Fielding took place in August 2022. To keep up with recent announcements, visit Katapult's News page. To learn more about Katapult, click here.