Target adds buy now, pay later options with Affirm, Sezzle

Dive Brief:

Amid the buy now, pay later boom, Target has added Sezzle and Affirm as installment payment options for shoppers, the retailer announced on Wednesday.
Customers can use Affirm for purchases worth more than $100 on Target's website, per the announcement. Shoppers must first apply with Affirm before they can use it as a payment method at Target.
Shoppers can apply to use Sezzle while shopping at Target's website or mobile app, through Sezzle's Virtual Card at checkout. Customers can use the option through Apple Pay and Google Pay and while making drive-up orders, same-day delivery orders through Shipt and its other same-day fulfillment services, the company said.

Dive Insight:

As the holidays come close, Target is making holiday shopping work within the family budget, said Gemma Kubat, Target's president of financial and retail services.

"Through our partnerships with Affirm and Sezzle, Target is investing in new financial tools that make our shopping experiences more flexible and personalized to guests' needs, right in time for the holiday season," Kubat said in a statement.

Besides Target, Affirm has lined up multiple other retail partners over the past few years, including Walmart, Amazon and David's Bridal. The installment payments platform raised $1.2 billion after going public earlier this year.

Sezzle has developed relationships of its own, including with Discover. Earlier this year, Discover Financial Services invested $30 million into Sezzle and partnered with the installment payments company to offer its buy now, pay later option to select merchants across the Discover Global Network.

Though consumers are turning more to buy now, pay later options, they pose a risk to retailers and customers. A September Credit Karma survey found that 44% of respondents used an installment payment service to buy something they needed, but of those, more than a third (34%) have missed one or more payments. Just under three-fourths of respondents said they think missing a payment caused their credit score to drop.

In August, Fitch Ratings reported on the risks of buy now, pay later, noting that borrowers who seek installment payment platforms may have little wiggle room to weather financial hardships. And because these services don't always report customer data to credit bureaus, it's unclear just how much debt these shoppers are accumulating, Fitch said.