Buy Now Pay Later (BNPL) – which is one form of point-of-sale (POS) financing – has become increasingly popular in recent years. As of first half of 2023, there are an estimated 400 million people worldwide using BNPL service with a market size valued at $334 billion in 2024 and predicted to rise 105% to reach 687 billion by 2028, according to Juniper Research.
But so far, it’s a financing service dominated by fintechs. Largely unregulated and unburdened by monolithic legacy systems, fintechs have the size, agility, and tech-savviness to make the most of BNPL. Indeed, any list featuring the top global BNPL providers includes a host of fintechs and a noticeable lack of incumbent banks.
So, why is this? And should banks be worried? In this report, we’ll look at the current state of BNPL, why banks have fallen behind their fintech competitors, the role regulations may play in the near future, and how banks can get involved in the growing phenomenon, and more particularly how to find new profitability drivers in the current economic context.
BNPL is an attractive form of payment that drives purchasing decisions, particularly in today’s inflationary economic environment. However, there are several things to keep in mind. For example, BNPL providers also feel inflationary pressures, so they need to reimagine how to offer this type of financing and make it profitable.
Moreover, rules are on the horizon, ensuring Buy Now Pay Later is better regulated, BNPL lending by banks and fintechs is responsible, and customers are more aware of the intricacies and risks of the payment method.
The BNPL market is growing and evolving, impacting the expectations of consumers in their borrowing journeys – not just BNPL, but mortgages, standard consumer credit, auto credit, etc. As such, all forms of lending will be forced to become more transparent, ensuring customers are fully aware of what they’re agreeing to and how it could affect their creditworthiness.
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