white papers

    FinTech and the rise of buy now, pay later

    FinTech and the rise of BNPL
    Christian Vondenbusch - Portfolio Manager

    Christian Vondenbusch

    Portfolio Manager
    Jeroen van Oerle - Portfolio Manager

    Jeroen van Oerle

    Portfolio Manager

    Need to know

     

    • Pioneering vendors of buy now, pay later services are being challenged by start-ups swarming over low barriers to entry into the market.
    • All providers will need to prove the resilience of their business models as the recovery matures and regulators seek to embed greater consumer protections.
    • Could stronger competition, decelerating growth and stricter regulation compel pure-play providers to rethink their business models?


    What’s next for BNPL?

    The pandemic has accelerated many digital trends, including the use of buy now, pay later (BNPL) at the checkout.

    BNPL pioneers are being challenged by an avalanche of new start-ups. The entry barriers to BNPL services are extremely low, so it is easy to launch new integrated products, or find cooperative agreements with network providers or merchant acquirers in order to push solutions.

    As competition heats up and the economic cycle kicks in, BNPLs will need to prove that credit losses can be covered, and that the business model can remain externally funded by equity, debt, deposits or wholesale funding. The credit model has not been tested yet in a real economic downturn.

    Regulators across the world have taken notice of the fast growth of BNPL platforms and are starting to focus on debt affordability, customer protection, transparency of pricing and the use of personal data. BNPL oversight will have to follow to protect customers from overspending and potential debt risks.

    With stricter regulation coming, and on a more level playing field with traditional credit providers, growth could slow down, competition with regulated financial institutions could increase and pure play BNPL companies might have to rethink their business models and monetisation strategy.

    We expect the growing popularity of BNPL to continue, but it could be tested by stricter regulation, more competition and higher credit losses in an economic downturn.

    To read our white paper, ‘FinTech and the rise of BNPL’, please use the download button provided.

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