Changing consumer behavior and the continued rise of e-commerce are fueling flexible payment options such as buy now, pay later (BNPL) solutions, especially in Europe. Transition to digital payments had been long underway, even before the global pandemic outbreak. However, it has drastically accelerated customer preferences for using flexible payment solutions such as BNPL. According to the Financial Conduct Authority in the UK, five million people have started using buy now and pay later platforms since the global pandemic. As a result, in the United Kingdom, the use of buy now, pay later platforms had almost quadrupled in 2020. Consequently, PayNXT360 expects that the growth in the flexible payment industry is likely to attract several global, big BNPL brands to the European market, leading to several mergers and acquisitions in the following quarters.
Mergers and acquisitions as a gateway to the largest e-commerce market
European Union countries represent the second largest e-commerce market in the world. With more than a US$1 trillion annual e-commerce market, major BNPL providers are looking at mergers and acquisitions as a gateway to one of the largest e-commerce industries.
For instance, in May 2021, Zip Co Limited, an Australia-based BNPL service provider, announced the acquisition of European BNPL provider Twisto. In January 2021, Zip invested €16 million in Twisto and will now be purchasing the remaining shares for an amount of €89 million. This acquisition of Twisto will provide Zip easy access to 27 European Union countries.
The buy now, pay later platform Twisto holds a European Payment Institution License. Therefore, subject to regulatory consents, Zip can now offer BNPL services across all EU member states. Moreover, the acquisition will enable Zip to compete with other major BNPL companies such as Klarna and Unzer (formerly Heidelpay) in the European market.
Twisto is one of the fastest-growing platforms in Europe. More than 1 million users have already transacted on the BNPL platform. Additionally, the buy now, pay later provider has more than 14,000 merchant partners available on its platform. Some of these merchant partners include Pizza Hut, New Balance, and Gap.
European BNPL players are expanding their market through mergers and acquisitions
In Europe, many established and new BNPL players are involved in mergers and acquisitions to expand their presence and ease competition. For instance, in February 2020, Klarna acquired Italy-based buy now, pay later brand Moneymour to expand its services in the Italian market.
In similar M&A deals, Afterpay acquired Fintech firm Pagantis to expedite its expansion into the European market in August 2020. According to Afterpay, the European market is primed for BNPL services because of the growing e-commerce industry and large millennial population. Through this acquisition, Afterpay launched its BNPL services in France, Spain, and Italy, under its European brand Clearpay.
By launching its services in the European market, Afterpay rivals Klarna for a higher market share in Spain and Italy. In France, the BNPL provider competes with PayPal, which launched its buy now and pays later services in July 2020.
Mergers and acquisitions to increase in the Middle East BNPL sector
The e-commerce market is one of the fastest-growing industries in the Middle East; wherein online spending has increased at the rate of nearly 25% annually. Therefore, the Middle East region has become a lucrative investment opportunity for global buy now, pay later platforms, looking to expand their services globally.
In addition to its expansion in the European market, Zip also acquired Dubai-based buy now, pay later provider Spotti. Similar to Twisto, Zip owned 20% in Spotti through its initial investment in December 2020. According to the company, building on its initial investment, the global BNPL player will also acquire the remaining 80% in the Dubai-based flexible payment firm.
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