BNPL market in the Europe has gained prominence over the past few years. There has been a shift in consumer shopping habits with increase in digital channel spending supporting BNPL growth. BNPL’s popularity has increased in Europe, which has one of the largest e-commerce markets globally. Over the forecast period, market share of BNPL payment in e-commerce spend is likely to increase significantly.
The COVID-19 had led to increase in e-commerce globally and surge in adoption of alternative payment options including BNPL. The pandemic has created a favorable environment for BNPL players to push their offerings in the region as customers seek for flexible payment options for their online purchases. Also, investments activities in the market are increasing which will help BNPL players to expand their business and customer base in Europe, further increasing their popularity.
Apart from fintechs, banks and neo banks (digital only banks) have also entered the BNPL space to compete effectively. For instance, Oney Bank based in France launched its BNPL service in Germany in September 2020. Banks with existing merchant relationships could have a competitive advantage to enter the growing BNPL market.
Factors such as millennials, significant debit card usage as well as high retail spend make Europe an attractive market for BNPL expansion. Also, Central and Eastern Europe have low credit penetration and utilization which pose opportunities for BNPL players looking to enter these markets. Additionally, in France where debit cards are the norm and Italy where debit cards are preferred over credit cards, BNPL players are presented with opportunities to penetrate these markets with their flexible payment options as customers are wary of credit.
Of the various countries, BNPL market in the UK is one of the fastest growing globally backed by a huge e-commerce industry in the country. BNPL is being used as an alternative to credit card and its popularity has risen significantly since COVID-19. Due to COVID-19, the number of people using online shopping channel increased rapidly in the UK. According to PayNXT360 estimates, BNPL fintechs are growing annually at over 60% in the UK in 2020.
Some of the key players operating in the European BNPL market include Klarna, Clearpay (Afterpay), Zip, Scalapay, Stripe, PayPal, and others. PayPal entered the UK market with the launch of its 'Pay In 3' Option in October 2020.
Rising number of M&A’s taking place in the BNPL market
Strategic expansion via acquisitions has enabled companies in the BNPL market to expand to new geographies or target a larger customer base. In October 2020, Klarna, a shopping and payment provider purchased Woila, a Swedish post-purchase experience startup, to develop products which can further enhance customer shopping experience.
Also, Afterpay entered into the UK market with the acquisition of Clearpay in 2018. Afterpay’s Clearpay acquired Pagantis, a Spanish credit provider, for $82 million in August 2020. This enables Clearpay to expand its footprint into countries where Pagentis operates including Spain, France, Italy and Portugal. The acquisition will enable Clearpay to capitalize on robust demand in the region. To further expand its presence, Afterpay, has rolled out its European service, Clearpay, to retailers across France and Spain, March 2021.
Earlier, in February 2020, Klarna acquired Moneymour, an Italian BNPL startup, to leverage Moneymour’s knowledge and expertise to further enhance its underwriting capabilities as well as customer shopping experience. Moneymour credit scoring engine which is backed by PSD2 enables quicker and automated credit decision only with a few clicks. Also, it launched a product development hub in Milan.
Other players such as Zip have also expanded into Europe by raising $120 million funds via an institutional placement and intend to use $15 million of these funds to support new merchant and customer acquisition across the UK. The company has also entered into distribution agreements with Stripe and BigC in the UK.
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