Interview Synopsis

US buy now, pay later Q1 2021 update – Klarna, Afterpay, PayPal & others

  • Multi Asset
  • Financials
  • North America

The buy now, pay later (BNPL) industry is a relative newcomer, but as widespread interest accrues in this space so too does the looming prospect of heavier regulation. To explore this segment’s progression and its future prospects, Third Bridge Forum interviewed a former divisional head from Affirm Holdings Inc.

Securing the online bag: what’s the state of play for BNPL providers?

One of critical trends highlighted by the specialist was industry adoption. Even though this business model was nascent about five years ago, “we’ve gotten to a point where, even in the US, the BNPL market is around 2% of annual e-commerce, which is still a pretty small number compared to countries like Australia, where that number hovers [at] more like 20%.”

Another topic is the potential for interest rates to increase. “The entire industry is really based on lending, [and] as rates start to increase, cost will go up.” This could pose challenges to profitability over the next couple of years, they explained.

The discussion moved on to the worst-case scenarios for industry regulation. At present, BNPL companies offering loans with fewer than four payments are not covered by Regulation Z in the US. Although this could be a potential change, our specialist is “not confident that it will” happen. 

They also questioned how much customer data are required for what are generally 6-8 week loans. “I think the CFPB [Consumer Financial Protection Bureau] attacking how much can be lent and starting to dig into the weeds about ensuring that customers aren’t over-extended will have pretty substantial impacts.” However, they are “not confident” this would be an actuality over the next couple of years.

There are three leading global players, each with a slightly different regional focus. “Globally, it’s probably the battle between Afterpay and Klarna. Klarna has a much bigger European presence although Afterpay is getting into that market through acquisition.” Afterpay  is also the leading presence in Australia. 

However, the industry is becoming more crowded. While there is still space to grow, the former head believes that “the real growth will be adoption within merchants that are already using it.” Smaller players, the potential for rationalisation, and whether more established players would enter the market were also covered.

To access all the human insights from Third Bridge Forum’s US buy now, pay later Q1 2021 update – Klarna, Afterpay, PayPal & others Interview, click here to view the full transcript.


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