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Will Your Next Brand Partner Buy Now, Pay Later?

This post is not about structuring sponsorship payment schedules, as interesting and important as that topic may be. No, the headline refers to an emerging category that may become an active player in sports and entertainment partnerships—buy-now-pay-later (BNPL) payment systems.

Well established in other parts of the world and experiencing significant growth in the U.S. in part due to the surge in in online shopping spurred by the pandemic, the top brands in the category have begun planting their flags in hopes of grabbing market share.

Klarna grabbed the spotlight last month with a Super Bowl spot featuring mini Maya Rudolphs splitting the purchase of a pair of cowboy boots across four installments. The $5.6-million splurge was a loud shot across the bow in the battle between Klarna and the two other leading BNPL lenders, Afterpay and Affirm.

There is serious money at stake. Citing figures from CB Insights, an Ad Age article last week stated, “the buy now, pay later industry, which generated $20 billion to $25 billion in purchases last year, will grow as much as 15 times its current volume by 2025 to exceed $1 trillion in annual gross merchandise volume.” (The lenders make money by taking a percentage of each sale from the retailer.)

Rights holders are in position to make an excellent case that the BNPL brands would benefit from a partnership with sports and entertainment properties as they seek to establish themselves and fend off efforts by credit card companies and others to offer their own BNPL plans.

These upstarts are especially attractive sponsorship targets because they are more likely interested than well-known brands in properties’ “low-hanging fruit,” i.e., visibility-generating benefits such as signage, jersey patches and other branding opportunities that can quickly generate awareness. As Ad Age pointed out, awareness of the three major BNPL brands among online shoppers stood at just 23 percent for Afterpay, 20 percent for Affirm and 19 percent for Klarna, according to a recent Ad Age-Harris Poll survey.

Three considerations rights holders should keep in mind as they place the BNPL category on their radar screens:

Category may not be open. If you have an existing credit card or other type of payment system (PayPal, Venmo, etc.) sponsor, it is likely they are introducing BNPL services for their existing cardholders and customers and consider the new players direct competitors.

Even if BNPL is not explicitly mentioned in your category exclusivity definition, there is no way existing credit/lending sponsors would welcome the addition of these new players

However, the disruption they have caused in the category creates the opportunity to offer new activation ideas to your current credit card partners to assist them in introducing their new BNPL features and familiarizing consumers with them.

Potential for controversy. The lure of paying over time with no interest charged is a powerful one, and as Ad Age pointed out, the sector could be in for scrutiny: “It could meet with increased inspection from financial regulators moving forward, experts predict. Critics have said that these brands are persuading younger consumers to incur debts that in some cases, they cannot pay off.

Any rightsholder partnering with a BNPL brand should be prepared with a communications plan that addresses the issues surrounding the category, as well as contract language that would protect the property if a sponsor’s business practices cast a negative light on the sponsorship.

Benefits beyond awareness. While gaining familiarity may be the top priority for BNPL providers, establishing an emotional connection with fans to engender trust, loyalty and credibility also is critical for a category that deals with personal finances and information. Activation ideas, related content, etc. should keep that mind.

In addition, association with important social issues is important for at least one of the new brands (and could be for others in the near future). Ad Age reports that Klarna has committed one percent “of the capital it raises moving forward to sustainability efforts.”

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