The Buy Now Pay Later (BNPL) payment model witnessed rapid growth in the USA. In a report on BNPL and Credit Risk, Aite-Novarica observes that 37 percent of BNPL users feel that it was the only way they could afford to buy what they wanted.1 Further, according to Mercator Advisory Group, U.S. volumes of BNPL is expected to cross USD 100 million annually by 2024.2
Growth in this segment is enabled by a growing range of BNPL options that include instalment loans of one year or longer, apps with shopping opportunities, short term pay in plans, and so on. This has led to customers adopting new payment modes at checkout both online and in-person. Apart from the U.S., effectively every large and midsize merchant in developed economies, has launched, is in the process of launching, or has considered introducing a BNPL solution in recent years.
Andrew Walduck, the Chief Operating Officer of Latitude Financial Services attributes the surge in this space to the transparency and other benefits it offers. He said, “People like the transparency of no added fees, and a pre-determined instalment plan helps them budget.”
Given the convenience it offers, BNPL payment options are no longer just limited to the checkout page. Merchants are gradually endorsing BNPL on their homepages and on individual product pages and seizing consumer interest quite early in the buying journey. Additionally, with online lending changing the borrowing culture, fintech providers introduced payment-as-a-service, thus, prompting banks to restructure their lending process.
While the BNPL segment is still witnessing growth, there are also instances of it getting increasingly crowded with players. BNPL leader Klarna lost about 85% of its valuation in a year, while its main competitor, Affirm, also witnessed a tumble in its stock value.3
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