Millennials and Gen Z will be the two cohorts driving demand for buy now, pay later schemes as they were hit particularly hard by the pandemic, says GlobalData.
The leading data and analytics company notes that airlines partnering with fintech companies to offer these schemes could attract price-sensitive millennial and Gen Z travelers looking for flexible, low-cost payment methods.
According to GlobalData’s Q4 2021 Consumer Survey, 34% of Gen Z and 36% of millennials stated that they were ‘extremely concerned’ regarding their personal finances, which were the two highest percentages out of all the age cohorts that responded to this question.
Uplift, a buy now, pay later service, deepened its partnership with Southwest Airlines in January 2022. Customers can book their Southwest flights to the Hawaiian Islands with interest-free payment options through the partnership.
Ralph Hollister, Travel and Tourism Analyst at GlobalData, comments: “Uplift’s use of the terms ‘interest-free’ and ‘no late fees’ will no doubt attract price-sensitive millennial and Gen Z travelers that are looking for flexible, low-cost payment methods. Most importantly for airlines and their recovery timelines, buy now, pay later enhances accessibility as smaller payments can be made over several months, which translates to higher load factors. The accessibility that this payment solution offers means it is not only low-cost carriers (LCCs) taking advantage of this scheme with Delta and American Express announcing their joint venture last month.”
Delta’s flexible payment option allows for Amex customers to break up their Delta purchases into monthly payments for an additional fee.
Hollister adds: “Airlines such as Delta can’t afford to only be seen as a premium service, as it will struggle to attract Gen Z and millennial passengers. Through this payment option, Delta can get its foot in the door with these younger cohorts, then try to create repeat custom through its loyalty program.
“Buy now pay later could play a key part in the recovery of airlines that have adopted this payment method. Flexibility and affordability are key influencing factors for younger travelers, and this solution could even inspire a lifetime of loyalty.”