Credit cards have been around for a very long time now, so what makes Buy Now Pay Later stand out? Why is it considered a new solution to an unresolved problem?
Indeed, BNPL as its name infers is a Fintech solution that allows consumers to buy an item they want now without being required to pay instantly. It differs from a regular credit card in 2 main ways. First, BNPL arrangements often don’t charge interest or fees as opposed to the whole lifeblood of a credit card. Second, BNPL providers have a fixed repayment schedule—generally several weeks or months, unlike the credit card system which requires a minimum payment due each month on the card balance.
In the wake of the Coronavirus pandemic which accelerated the growth of online shopping, BNPL gained a lot of popularity.
As it stands, the leading BNPL service providers are Affirm, Klarna, Afterpay, and Paypal. Some offer other fintech services as well but have managed to gain huge popularity in the BNPL sector. According to Statista, as of June 2021, Affirm has around 7m active users worldwide, Afterpay has 16m, whereas Klarna has more than 90m. These stats highlight the popularity of BNPL amidst the global pandemic.
Here are the top 9 Buy Now Pay Later Unicorns in 2022 by Market Capitalisation:
Affirm is a US-based BNPL payment provider which offers a flexible, transparent, and convenient way to pay overtime and allows you to select the payment schedule that works for you, then confirm your loan.
Upstart is a leading artificial intelligence (AI) lending platform designed to improve access to affordable credit while reducing the risk and costs of lending for our bank partners. It was founded by ex-Googlers.
3. Du Xiaoman FinancialP
Du Xiaoman Financial is a short-term loans and investment services provider. It is also known as Baidu Financial Services Group (FSG), and operates as Baidu’s fintech arm.
4. Green Sky
GreenSky offers loans paid back over weeks and months, usually for large purchases.
Ziltch allows you to shop online and pay over time. Alternatively, earn cashback when you pay in-store.
Creditas is a Brazilian lending business and is currently the largest Fintech for secured loans in Brazil.
7. Zip Co
The Zip digital wallet has two types of interest-free accounts, Zip Pay and Zip Money. These accounts can be used with retail partners online and in-store anywhere Zip is accepted. The company is also the owner and developer of the freeware app Pocketbook, which is one of Australia’s largest non-bank financial apps.
DailyPay is an American financial services company founded in 2015, which provides payroll services such as earned wage access.
Sunbit is a BNPL technology company. The firm’s services are offered in-store and online across nearly 7,300 locations.
To view the full list of Buy Now Pay Later (BNPL) Unicorns by Market Capitalisation, view our live ranking of the largest Fintech companies.
Which countries do BNPL unicorns come from?
All current BNPL unicorns originated in the Americas. As it stands, 4 out of the 9 present BNPL unicorns were founded in the United States and one was founded in Brazil. Many financial services startups and well-established companies in the US have found success in acquiring BNPL as a service. Indeed, the percentage of Gen Zers in the US using BNPL has grown 6x from 6% in 2019 to 36% in 2021. The US payment landscape has been evolving quickly and consumers have been quick to jump on the latest trends.
However, BNPL’s popularity is not limited to the US, Latin America quickly jumped on the trend with BNPL providers such as Addi expanding and raising funding. In fact, Bogota-based Addi has recently raised $75million in a round of funding. Brazil’s regulatory environment which encourages competitiveness in the financial sector has boosted innovation and made it a hub for Fintech solutions such as BNPL.
Notably, Australia has made it to the list with stats showing that the BNPL Gross Merchandise Value in the country will increase from US$ 7354.4 million in 2020 to reach US$ 52456.2 million by 2028. The BNPL market has been one of the fastest-growing markets in Australia.
Finally, the UK is also a huge adopter of BNPL services. Indeed, a review from the FCA’s Christopher Woolard found that the U.K. BNPL market is worth £2.7 billion ($3.7 billion), with 5 million Brits using such products since the start of the pandemic.
What are the Buy Now Pay Later (BNPL) trends in 2021-2022?
Millions of shoppers now use BNPL service providers to purchase anything they desire instantly. This explains the rise in providers with even big companies deciding to offer BNPL services. Companies such as PayPal, Square, Monzo, Revolut, Amazon, Walmart, and Mastercard are all offering BNPL options at checkout. In fact, BNPL transactions have significantly increased during the COVID-19 pandemic with consumers finding it harder to access credit and with deterring incomes.
Here are some interesting stats:
- BNPL experienced 215% year-over-year growth in the first two months of 2021 according to Adobe.
- Nearly 75% of BNPL users are Generation Z or millennial as they seem to be more cautious about credit in the aftermath of the financial crisis -eMarketer
- According to a survey conducted by the Mercator Advisory Group, adults in the first half of 2021, around 52% of customers aged 18-24 had used BNPL solutions in the past 12 months.
- Roughly 1.5 billion consumers will spend $995 billion through BNPL by 2026.
However, the risks and disadvantages of BNPL have been massively talked about as well. Economists and experts worry that the principle of buying without having the money to pay would eventually worsen credit access and lead to severe defaults. Nonetheless, this innovation has been wildly accepted by both merchants and customers. In the upcoming years, it is worth looking into changes in the regulatory systems.
What is the Future of Buy Now Pay Later (BNPL) in the next 5 years?
The global Buy Now Pay Later market size is expected to reach USD 20.40 billion by 2028, registering a CAGR of 22.4% from 2021 to 2028.
It is predicted that BNPL service providers will take the following steps:
- Sponsor shoppers on their own apps: Brands are starting to promote some products via sponsored listing formats, and pay only when a shopper engages with the ad. For instance, Afterpay will enable its merchant partners to advertise its app to boost their promotions, products, and offers.
- Claim a commission from sales: Today’s merchants will demand accurate attribution statistics to see just how much the BNPL providers are boosting their sales.
- Specialise in a product category: To make the customer journey as smooth and pleasant as possible, BNPL providers will soon specialise in a product category.
Lastly, although this has already started, big tech companies will continue adopting BNPL solutions in an attempt of keeping up with the current Fintech ecosystem.