Trends and Outlook for BNPL

August 2022

Buy now, pay later (BNPL) lending has rapidly become one of the more popular lending formats in recent years. Instalment billing is growing, with a variety of formats, players and industries. Payments players have been quick to jump on the bandwagon, but already signs of stress are appearing as BNPL must cope with forces of regulation, consolidation and inflation. This report will explore where BNPL is today, with case studies and a glimpse of the future.

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Key Findings

Expanded bench of BNPL players

Buy now, pay later firms are coming in an increasingly number of different spaces, with fintech firms, issuers, networks and retailers all entering the market.

Digitisation has expanded BNPL formats

The growth of digital helped set the stage for BNPL to grow via phone commerce. This was accelerated by the pandemic, which pushed many previously reluctant merchants to digitise their payment flows and ordering.

BNPL is seeing innovation in its iterations

BNPL is no longer just for white goods and other durables – it has grown to all manner of goods and services including travel, daily necessities and even firearms.

Risks are, however, on the horizon

Despite very rapid growth, risks are present in the space. Sharp rises in interest rates, challenges in finding creditworthy consumers and saturation among companies mean that BNPL’s future is likely to be quite volatile.

Nevertheless, BNPL is here to stay

BNPL has been around for years and is here to stay, even with forthcoming challenges. Technology is changing the implementation, and there will be reckonings in a number of regards, but the fundamental model has staying power for players throughout the value chain.

Introduction

Scope
Key findings

BNPL basics and overview

Buy now, pay later has a long history that is now undergoing seismic change
What types of stakeholders and BNPL models exist?
When/where does the BNPL transaction take place?
Important considerations: Exploring benefits and costs of BNPL for commercial stakeholders
Consumer considerations in a new era of BNPL
Where does BNPL stand today?

Geographic BNPL breakdown

Consumer lending in North America overview
PayPal extends its offerings beyond the four payment model
Consumer lending in Latin America overview
Consumer lending in Asia Pacific and Australasia overview
Afterpay enters the BNPL space early, later acquired by payments processor Square
Pix Parcelado combines the convenience of instant payments with BNPL practices
Southeast Asian Grab offers BNPL in superapp environment
Consumer lending in Middle East and Africa overview
Tashlumim instalments in Israel predate BNPL craze and offer retail POS example
Consumer lending in Europe overview
Poland’s Allegro Pay offers an e-commerce platform native experience
Sweden’s Klarna sets the fintech BNPL example in western markets

Industry/unique applications

Mobile devices enable and advertise the BNPL offering
Apple Pay Later arrives late, but enjoys a considerable userbase advantage
Airlines move to extend BNPL to the travel environment
BNPL use for travel picking up with companies such as India’s MakeMytrip
H&M partners with Klarna for clothing payments
BNPL for daily necessities, a lifeline or a worrying phenomenon?
B2B payments offer a vast opportunity for BNPL providers
In-store BNPL grows through providers such as Australia’s Humm

The future of BNPL

As more mature BNPL markets grow, a wave of consolidation is cresting
Central bankers turn the screws on interest rates, raising existential questions for BNPL
Regulatory developments
Credit scoring/loan seasoning
Potential impact on cards

Conclusion

BNPL is to here to stay, both influenced as well as influencing the future of credit markets
Data points coming in next edition

Consumer Finance

This is the aggregation of ATM, charge, credit, debit, e-purse and retail cards. Note that smart cards are not included in financial cards.

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