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In February 2022, Sydney-based buy now, pay later (BNPL) company Zip announced to acquire Minneapolis-based Sezzle to expand its market base in the United States. According to Zip, it will buy its rival in a deal valued at around US$350 million. Notably, Zip entered the United States by acquiring QuadPay for US$300 million in 2020. The company expects the acquisition to help in gaining a larger market share in the United States.
The United States BNPL market attracted significant investments in the last two years. Moreover, the pandemic further fueled the growth of this market and attracted consumers who flocked to buy products through installments.
However, as the sector recorded significant growth, it also 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 method. Most importantly, the piling of debts of the consumers is the point of concern of these regulators. Consequently, BNPL firms are getting ready to face the regulatory changes. For instance,
However, other BNPL providers did not respond to the scrutiny of CFPB. The regulator requested information from Block's Afterpay, PayPal, and Zip to provide information regarding how much debt BNPL users have added up and whether operators have followed consumer protection laws. Also, the agency is seeking information on the companies' data harvesting from consumers. According to PayNXT360's analysis, almost one-fourth of BNPL users are concerned about their ability to repay their BNPL bills, and with millennials, this figure rises to over one-third. Therefore, it is expected that the BNPL market to face some regulatory mandates in the short to medium term.
To know more and gain a deeper understanding of the BNPL industry in the United States, click here.
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