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Blog Posts: Retail Law Advisor

New Payment Structures for a New Age

We’ve written about changes in the way goods are bought and sold, from brick-and-mortar to e-commerce. But what about how goods are being paid for? As the retail landscape shifts to digital terrain, retailers would be wise to think about how they accept payments to suit new ways of buying and attract a new generation of debt-wary consumers.

Currency has taken on many forms throughout the ages: silver, gold, paper, plastic. Now that retail is decidedly digital, tangible methods of payment seem outdated and web-based payment systems are on the rise. Last week, GoCardless, an online payment service based in the United Kingdom, reportedly raised $75 million from Salesforce and Google to fund its expansion into the United States. Meanwhile, veteran web-based payment systems Venmo and Apple Pay are expanding. The number of monthly active Venmo users reportedly increased 185% month-over-month from August to September of last year and is now as widely accepted by retailers as PayPal. Earlier this year, Apple announced that its contactless payment system will soon be accepted at 65% of all retail locations nationwide. Part of the reason for this rise in web-based payment systems is due to the way goods are being purchased, and part of the reason is due to who is doing the purchasing.

The rise of web-based payment systems coincides with the increase in online shopping generally and the increase in online subscription services specifically. With just a few clicks, pretty much anything you want can be shipped to you automatically each month for a set fee: clothing, electric toothbrushes, health-monitoring cat litter, occult goods. In 2017, there were 5.7 million subscription shoppers, and the subscription e-commerce market has grown by more than 100% year over year since then.

The connection between subscription services and web-based payment systems is, in part, practical. Unlike credit cards, web-based payment systems do not have expiration dates, so you’re not caught without your monthly dose of Hawaiian coffee or international snacks because the card you’ve been paying with expires. (GoCardless specifically targets this problem—its specialty is recurring payments.) The other link between web-based payment systems and subscription services is demography: millennials apparently love monthly treats just as much as they love paying for things on their phones. And millennials are incredibly important to the future of retail. 

Capturing the 83 million people born between 1982 and 2000, millennials currently exercise $200 billion in spending power and are projected to overtake Baby Boomers as the biggest spenders in the country. But they don’t use cash, and they are literally terrified of credit cards. To tap into millennial pocketbooks, retailers need to innovate.

Accepting web-based payments is one way retailers can take advantage of the millennial market; another is to change the way payments are structured. Companies like AfterPay, Quadpay and Sezzle offer flex term, interest-free plans that allow shoppers to pay for their purchases over time. These “buy now, pay later” plans are basically layaway’s hip younger cousin, and they are gaining momentum with retailers. AfterPay debuted at Urban Outfitters in May of 2018. Today, it lists Sunglass Hut, DSW, Rebecca Minkoff, Everlane, Steve Madden, and KKW Beauty as participating stores. Even Forever 21 offers its young shoppers the option to pay in installments. 

Installment pay programs are particularly attractive to millennials. Still scarred by the 2008 recession and saddled with unprecedented student loan debt, millennials are wary of consumer debt. Only 33% of adults aged 18 to 29 own a credit card. According to a survey by, millennials fear credit card debt more than they fear dying and war. But millennials aren’t flush with cash, either—they are actually less well-off than previous generations. They have lower earnings, fewer assets, and less wealth, but their consumption habits are similar to those of their parents. Given their desire to buy things, their lack of cash, and their aversion to plastic, it makes sense that millennials would be interested in shopping at stores that offer the option to pay in installments.

As the retail landscape continues to shift and millennials exercise their substantial purchasing power, retailers who do not adapt to new payment modes and structures will risk missing out on a considerable millennium-backed revenue stream and, maybe even more importantly, may cease to be relevant retail players. And relevance may be the most valuable currency of them all.