BNPL’s popularity is certainly soaring to new heights, with Iberia—Spain’s state airline—introducing a new way consumers can pay for tickets: through flexible installment plans.
According to Euro Weekly News, travelers purchasing flights via Iberia’s website will have the opportunity to finance their purchases up to €10,000. The payment in installments will enable Iberia passengers to divide the total cost of their tickets over a repayment period of three, six, nine, or twelve months.
“Installment lending for travel is particularly interesting because this segment is predominantly the realm of credit cards, which offer generous reward packages,” said Ben Danner, Research Analyst at Javelin Strategy & Research. “Iberia offers a co-branded credit card with Chase with a current sign-on bonus of 75,000 points after spending $5,000 on purchases.”
“At first glance, this BNPL product may compete with card acquisition, however, given the card charges a $95 annual fee, it may target a different customer base,” he said. “Thus, Iberia’s BNPL options are enabling credit access to a far wider audience.”
To implement this financing option, Iberia has partnered with several financing providers. Currently, the service is offered through Iberia Cards, with seQura and Aplazame. The company is also reportedly evaluating new providers to expand the range of financing options available to customers. Although this payment method is currently exclusive to Spain, plans are underway to expand to other countries, including Italy, France, Germany, and Belgium.
A Surge in BNPL Services
The fintech sector has witnessed a surge in BNPL services over the years, with companies including Afterpay, Klarna, and Affirm gaining significant traction globally by providing consumers with alternative payment solutions that break down the cost of purchases into smaller, manageable installments. Iberia’s decision to implement a similar financing model within the airline industry highlights the growing convergence between the payments and travel sectors.
This move also aligns with broader trends in the payments industry, where traditional payment methods are being reimagined and supplemented with innovative alternatives. BNPL services have gained popularity among consumers, particularly millennials and Gen Z, who value convenience and the ability to spread out payments over time. By incorporating this payment scheme, Iberia aims to attract and retain customers who may be more inclined to choose airlines that offer flexible and accessible payment options.
Iberia is banking on increased ticket sales due to this effort, though seeing as BNPL operators typically charge at least 4% of the valuer of the transaction to offer the loans, it will be interesting to see if the company can generate enough additional sales to make it worth it.