******************************************** Transcription: If you’ve even moderately kept an eye on any payments related news source, there’s no way you have not been bombarded with the Buy Now Pay Later craze in 2021.
Almost all the widely known payment players in the field who could partake in the BNPL craze… actually did.
We are quite sure that you have heard about the likes of; Klarna, Affirm, and Afterpay, but industry Giants such as Mastercard, Paypal, Visa, Square, Monzo, Revolut, Amazon, and even Walmart, are all offering BNPL options at checkout or are partnering with BNPL companies to offer this service to their customers. Even mighty Apple is climbing aboard.
But what does all lie ahead for Buy Now Pay Later in 2022 and beyond? Is there still enough growth potential or are we seeing signs of consolidation in this space?
It might not come as a surprise that research indicates that Buy Now Pay Later can help sales to soar by up to 45% whilst simultaneously powering an up to 45% decline in shopping cart abandonment.
The most telling statistic of all is often the most simple one, and it certainly holds true with BNPL, which has seen its user base grow at an impressive 85 percent in the last 15 months. Consumer’s use of BNPL for retail purchases of Nike shoes, or the latest TV to even plane tickets grew from $20 billion in 2019 to $24 billion in 2020, to over $100 billion in 2021.
According to customer surveys, one of the biggest reasons behind consumers’ love for BNPL is the greater flexibility in terms of managing their finances. Research also found that a full 55.6 percent of BNPL adopters chose the method as it allows them to spread out their payments over time.
Which makes me curious, whether YOU have made a purchase using buy now pay later over the past 12 months?
Brick and mortar store BNPL applications still have a long way to go, certainly considering the fact that BNPL useability and Credit Cards are more than often compared – whereas in-store use of credit cards has well been adopted long ago.
As of today, 22% of merchants surveyed are offering Buy Now Pay Later as a payment option. Although the percentage widely varies across different industry segments, these numbers are expected to grow, as another 25% of merhants plan to implement BNPL in 2022.
In which industries you ask? The industries most likely to offer BNPL are retail, construction or utilities, Other segments that ARE currently offering BNPL, but at a lower rate include professional services, personal and consumer services as well as food, entertainment, and accommodation.
But even the lower segments, with for example food and beverage seem to be picking up pace.
Throughout multiple regions in the Western economies, BNPL adoption is still relatively low. Let’s take France for example, where the usage of BNPL services currently stands at around five to six percent compared to the usage of up to 25% in the North of Europe. This means that there is a huge potential for organic growth across France, but it’s worth noting the French traditionally have a high credit card penetration rate.
With the current BNPL offerings springing up like mushrooms after rain, we are well equipped to cater to those markets that have not yet widely adapted. Nevertheless, we have to agree that there seems to be no sign of the market slowing down any time soon.
That being said, there are obviously going to be significant extra bits of regulation that everyone expects, certainly in the European Union, with it’s high level of consumer protection.
Finally, Looking at this rather saturated but high growth market potential, how do you foresee the growth and what application or company can still make a big difference? Let us know in the comments down below.
Sezzle CEO on the growth of ‘buy now, pay later’ and the company’s outlook
Charlie Youakim, Sezzle co-founder and CEO, joins ‘TechCheck’ to discuss how e-commerce can stand to grow as a new Covid variant spooks fear in the market. Youakim explores growth opportunities for Sezzle. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Swedish fintech start-up Klarna saw its losses balloon in the first nine months of 2021, as costs increased sharply amid rising demand for buy now, pay later services.
The Stockholm-based firm posted a pre-tax loss of 3.1 billion Swedish krona ($344 million) from January to September, a fourfold increase from the 800 million krona it lost in the same period a year ago.
Klarna, which was last privately valued at $46 billion, reported net operating income of 9.8 billion krona, up 40% from last year.
The vast bulk of the losses came from general administrative expenses, which amounted to 9.5 billion krona, up from 5.9 billion krona last year.
Credit losses also rose considerably, totaling 2.9 billion krona year-to-date, higher than the 1.6 billion krona reported for the same period last year.
A Klarna spokesperson told CNBC the firm has entered nine new markets since the start of 2020 and now has over 90 million customers worldwide.
“Each market entry follows a consistent financial trajectory; as volumes grow, and more customers use Klarna, market knowledge improves and credit risk decreases, making mature markets sustainably profitable,” the spokesperson said in an emailed statement.
Klarna is one of the biggest players in the rapidly growing buy now, pay later, or BNPL, market. BNPL products let shoppers split the cost of their purchases into a series of equal monthly installments, often interest-free.
Klarna and rivals like Afterpay and Affirm make most of their revenue from the fees they charge merchants for processing transactions. Some also make money from late payment fees and interest charged on longer-term installment loans.
BNPL products have seen surging demand over the last year, thanks in no small part to an acceleration of e-commerce adoption triggered by the coronavirus pandemic.
Millions of shoppers now use a buy now, pay later service to finance their purchases. And the options are more varied than ever.
Meanwhile, big companies are jumping on the bandwagon, with PayPal launching its own product, Amazon and Apple partnering up with Affirm, and Square agreeing to buy Afterpay in a $29 billion deal.
Klarna has been aggressively expanding into the U.S. and Britain recently. The company controlled a roughly 18% share of the U.S. BNPL market as of Nov. 17, according to figures provided to CNBC by research firm YipitData, trailing behind Affirm, which had 36% market share, and Afterpay, with 21%.
In the U.K., Klarna has been on a charm offensive, meeting with top political figures ahead of new rules that would bring the BNPL sector under regulatory oversight.
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The Genius Business Model of Buy Now Pay Later
If you’ve bought anything online in the last couple of years, you’ve probably noticed some new payment option when getting to the checkout page of many online retailers Companies like Affirm, Afterpay, and Klarna have all started offering buy now pay later services that allow users to pay for their purchases over a series of instatement rather than paying up front and in full at checkout. The rise of this new payment form represents a major shift in the payments industry, offering consumers increased flexibility in managing their finances while avoiding the often times aggressive fees from credit cards. But with so much attention being paid to the buy now pay later market, I figured we should take a look at the underlying business model to get a better understanding of the market overall and determine for ourselves whether the hype is truly justified.
Chapters: 0:00-1:44 Intro 1:44-3:17 What is Buy Now Pay Later 3:17-4:48 Market Opportunity 4:48-6:00 Business Model 6:00-7:07 Value Proposition for Merchants 7:07-8:01 Unit Economics 8:01-10:33 Own the Demand 10:33-11:21 Flywheel Effect 11:21- 14:06 Recessionary Concerns 14:06-15:13 Closing Thoughts
Buy now, pay later: ‘The enemy is the credit cards,’ Affirm CEO says
#youtube #yahoofinance #credit Affirm CEO Max Levchin joins Yahoo Finance Live’s Rachelle Akuffo and Brian Sozzi to discuss company earnings, competition in the buy now, pay later space, the pullback in consumer spending, managing credit, investor sentiment, worker layoffs, and the outlook for Affirm. Don’t Miss: Valley of Hype: The culture that built Elizabeth Holmes WATCH HERE: https://youtu.be/Sb179GLPNYE
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