Auto repair shop software service Tekmetric works with more than 10,000 auto repair shops around the country, many of which started rolling out a new buy now, pay later service via Affirm this fall.
Customers who request estimates are shown the option of how they can finance their purchase — and since implementation, those who chose to use BNPL have spent about three times more than the average ticket. As of this fall, around 5% of transactions processed through Tekmetric were made using Affirm or Klarna.
BNPL platforms helped fuel holiday spending to new records during Cyber 5. But in a moment when many shoppers are looking to stretch their budgets, there’s an increased push to see BNPL used for services and in-person transactions. While companies like Affirm, Klarna and Afterpay are pushing physical cards, they’re also increasingly teaming up with locations that offer service-based transactions.
Neil Patel, vp of payments at Tekmetric, said the new BNPL offering is helping mechanics convert customers to bigger purchases because people who might be overwhelmed with an onslaught of repairs will have the opportunity to split up payments.
“If you think about the payment experience being the customer experience, it’s the first touch point where you can say, ‘Okay, let me help you with that,” he said. “How do we make this better for you so that you’re not feeling a negative way about [making car repairs]? And so BNPL was a natural extension of that.”
Other than mechanics, health care and elective medical procedures are increasingly offering financing through the services. And these tend to be larger, more significant transactions than what you might see on an e-commerce site. Afterpay reported its largest category in 2023 was arts, travel and entertainment for Gen Z and Millennials spending. Klarna reported this fall that its merchant network saw a 167% year-over-year growth in auto services, 315% in travel and 339% in education.
Last January, Affirm told Modern Retail that around 40% of its purchase volume from new merchants in its fiscal year to that point came from the nascent health care category. This includes places that offer cosmetic surgery, dental treatments, medical devices and veterinary and well services, with an average of nearly $2,500 per health care-related purchase.
Pat Suh, vp of revenue at Affirm, said certain categories like auto services and health care are a good fit for BNPL services because they can be high-ticket, unexpected expenses. Affirm has seen 30% year-over-year growth in the aftermarket auto space and more than $5 billion in transactions, she said. “Consumers are looking for flexible payment options and ways to manage their budget,” she said. “Maintenance happens unexpectedly, and these expenditures are at price points where installment financing is very attractive to the consumer.”
Overall, the BNPL industry is expected to see a 20.4% increase in payment value from 2024 to 2025 to $97.25 billion, according to Insider Intelligence data.
Payment technology platform Equipifi works with banks to create installment payment options for their customers. The company researched checking account data this year and found that about 7.1% of all BNPL transactions — regardless of company — during the Cyber 5 were auto-related. “The average ticket here was $390, which is significantly higher than what we see on general retail or even e-commerce,” Bryce Deeney, the company’s CEO and co-founder, said. Another 5.6% of usage was health care related, specifically for people splitting up medical bills or animal hospital visits averaging around $500. Then, another 4.2% of spending was for home services, covering contractors, home repairs or home improvement store visits.
Deeney said the data shows how BNPL usage is starting to mirror credit cards during emergencies. They may use it to cover an entire purchase upfront and pay it off over time. Sometimes, users will split this up after they make the purchase to get the money into their account. But other times, Deeney said people are looking up a BNPL plan ahead of time to see what they qualify for. “When we [look at] post-purchase data on the debit card side, these are customers who did have cash but would rather pay it off over time,” he said. “On the pre-purchase side, sometimes these consumers need to buy an expensive generator or fix their heater in the wintertime. They don’t have all their cash up front, but they have a job and consistent income.”
At Tekmeric, Patel said that there’s around a 72% approval rating for people who want to use BNPL for their transactions. Payments can be pay-in-four style or monthly installments that could include interest based on the customers’ financial profile.
He credits some of the interest to greater awareness of the platforms and what they provide.
“I think the shift from online to retail really for us in our space is really having to do with brand awareness,” Patel said. “I think people have got to the point where they’re familiar with these buy-now-pay-later solutions. They’ve utilized them on the online space and they’re starting to ask how can we utilize this in the non-digital world.”
