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One of the industries which gained maximum popularity in 2021 was the buy now, pay later (BNPL) industry. With more millennials and Gen Z consumers turning to finance their purchases with BNPL, the market growth skyrocketed. Particularly, market leaders in the industry such as Affirm, Klarna, and Afterpay have observed significant revenue growth. The industry is likely to see sustained growth in the coming quarters as well.
However, the industry recently faced much scrutiny from regulators and credit-scoring companies. With the entry of new competitors in the industry, how the BNPL space turns out is yet to be witnessed. Therefore, some of the upcoming trends of the BNPL industry which are going to continue in 2022 are as follows:
The market will continue booming with more online consumers turning to BNPL loans
According to PayNXT360’s Q4 2021 Global BNPL Market Survey, approximately one out of five online shoppers adopted BNPL payments options in 2021. It is noteworthy to mention that out of which close to 20% of the surveyed population were millennials. PayNXT360 expects the trend to continue in 2022, with more millennials and Gen Z continue to adopt BNPL options.
Big retailers such as Target and Amazon had started providing BNPL options in 2021 to boost their sales. These popular retailers had already provided convenience in payments through alternative payment options, which has converted many consumers to adopt these payments. Consumers are likely to continue to use these payment methods in 2022 while paying for the products. Notably, one of the leading BNPL players Afterpay expects that by 2025, 13% of online spending will use BNPL options.
Fintech giants and conventional banks will continue entering the BNPL space
In 2021, many fintech companies launched their BNPL services worldwide. With rising demand for easy access to credit has attracted not only startups but big fintech companies also in this space. Most fintech firms entered this space with an intention to grab a share of the growing market. For instance,
When fintech companies are rapidly capturing the BNPL market, conventional banks are also gearing up to expand their portfolio with the BNPL option. According to PayNXT360, despite new-age fintech companies are capturing market share quite rapidly, banks with vast experience in dealing with regulations will get the benefit when it comes to easy credit offerings. Consequently, banks are expanding their product portfolio either by launching their own BNPL product or through partnerships. For instance,
Therefore, the market will continue facing fierce competition with new players, especially banks, entering the space.
With the rising adoption of BNPL, regulators will increase the scrutiny of these loans
The gaining popularity of these loans had caught the eyes of the regulators, and The Consumer Financial Protection Bureau (CFPB) had been questioning the BNPL firms to provide proper information on the risks and benefits of the payment. Most importantly, the piling of debts of the consumers is the point of concern of these regulators.
BNPL loans are to be included in the credit reports by the credit-scoring companies
Since millennials widely take these loans for online transactions, credit scoring companies pay attention to the BNPL loans. For instance, Experian and Equifax, the credit scoring companies, have started including these loans in their credit reports.
With the increasing attention of regulators and credit scoring companies, BNPL loans are likely to be functioning more like traditional loans, which could start legalizing the BNPL payments in the long run, benefitting the consumers.
To know more and gain a deeper understanding of the global BNPL market, click here.
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