The Buy Now, Pay Later (BNPL) market is exploding. This offers great opportunities for e-commerce players, as well as traditional and disruptive financial services providers. The rise of BNPL is attracting new fintech companies. At the same time, it’s also stirring the interest of big tech players. This growing popularity is also leading to greater vigilance from the regulators. User-friendliness, seamless integration, and reliability are more important than ever in the field of BNPL services.
Juniper Research expects the market value of embedded finance to increase from €39 billion to €125 billion between 2021 and 2026. Buy Now, Pay Later (BNPL) will take a share of no less than 50% of this. On Black Friday 2021, PayPal saw Buy Now, Pay Later volumes rise by 400% compared to 2020. These are staggering figures that indicate that BNPL is rapidly becoming a payment standard.
Superior customer experience
BNPL’s huge popularity among the younger generations of consumers favors its growth. These consumers rely on simple, integrated, and flexible financing models. (E)commerce providers can seamlessly respond to this with Buy Now, Pay Later. BNPL gives the customer a superior experience compared with traditional credit. Therefore, it shouldn’t immediately be seen as an additional source of income. You should rather see it as a way to better serve your customers, as it improves their purchasing experience and removes friction in the area of payment. If you do it right, you’ll undoubtedly achieve a high level of customer loyalty, especially among Millennials and Gen Z.
A diverse BNPL landscape
Research by Euromonitor shows that the BNPL landscape in Western Europe is mainly dominated by the relatively new fintech industry, with both global and local players having a presence. The research also revealed a major impact on relationships within the credit world, with increased competition between traditional lenders and credit card operators. In response to this, banks are offering their own Buy Now, Pay Later services. They are joining forces with fintechs to do this. On the other hand, BNPL service providers are also entering the banking world, with the Klarna card and Affirm Debit+ functioning as true debit cards.
Big tech companies and BNPL
Unsurprisingly, Big Tech companies also closely monitor developments in the field of BNPL. The Amazon Pay Later service and Apple’s ambitions around a pay-later model are notable examples. The question now, of course, is do they regard the service as a way to meet the needs of their customers? Or do they also aspire to be fintech players themselves? For the time being at least, it seems to be the former. In several cases, the tech companies don’t develop or own the BNPL application themselves. For example, Microsoft partners with third-party ZIP (previously Quadpay) to offer a BNPL solution through its Microsoft Edge browser. Another example is the close collaboration between Amazon and Affirm.
Buy Now, Pay Later and legislation
As a result of the rapid expansion of BNPL and the entry of many new parties, legislators are monitoring the market more closely. They regard the fact that big technology companies and other non-banking players provide financial services without actually acting as banks as a grey area.
In the autumn of 2021, the European Commission put forward a proposal for a review of the Consumer Credit Directive (CCD). This proposal will require BNPL firms to provide clear information related to credit. As a result, consumers will understand exactly what they’re signing up for. Furthermore, it will tighten up the rules under which creditworthiness is assessed and look at excessive fees for late payments.
In February 2021, the UK government announced its intention to bring unregulated interest-free BNPL products under regulation. At the end of 2021, this resulted in a proposal that new rules should be implemented. These new rules would monitor how BNPL firms treat customers with financial difficulty. A level playing field for traditional financial players, fintechs, and large technology companies seems to be the next step in the expansion of Buy Now, Pay Later.
Discover our check-out solution for Buy Now, Pay Later services
Offering a BNPL solution is no longer an option for the e-commerce market but a must. The more widespread and popular BNPL becomes, the more important it will be to provide a BNPL solution that brings maximum user-friendliness to the customer.
Aptic offers you and your customers the optimal Buy Now, Pay Later solution. It’s easy to onboard and provides smooth payment integration and a handy customer portal with all credit information. You can of course customize the solution to work with your own brand and company style. It’s also fully integrated with your back-end and front-end processes. If you would like to know more, then please feel free to reach out to us, or read more in our latest whitepaper.