Countries Covered: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, UK
Publication Date: 20/04/2021
Questions Covered in the report:
- How many European merchants offered BNPL services in 2020 during the health crisis?
- What was the share of cross-border BNPL payments in Europe and Central Asia projected to be in 2025?
- What was the average customer debt at various BNPL service providers in the UK in 2020?
- Which BNPL start-ups are going to challenge major BNPL service providers’ in the near future in Europe?
- What were the top reasons to choose invoice or installment payment methods in different European countries in 2020?
During the COVID-19 pandemic, BNPL services in Europe grow rapidly: new yStats.com report
European consumers are increasingly opting for BNPL during COVID-19, however, service preferences differ on a country basis
According to figures cited in the new yStats.com report, in 2020, the BNPL service was offered by one-fifth of European merchants, a number looks optimistic for the BNPL service providers when compared to the share of retailers accepting credit cards. In Poland last year, the numbers were above the average, installment and deferred payments were offered by around two-fifth and about one-third of retailers, respectively. Moreover, from the consumers’ side, in Germany, about half of those who are aware of the BNPL option have already used it, and the top expectations of German consumers from the BNPL services were “transparent conditions” and “no interest rate”. This rather high user penetration rate is no surprise, as payments via invoice have been on the German market for a long time, and the invoice payment method is still strongly preferred over installments. Furthermore, the situation looked similar in the neighboring countries: Austria and Switzerland, where invoice payments were among the top three payment methods used for online shopping, and payments in installments closed the rankings. Meanwhile, in the UK, the majority of UK respondents in a November 2020 survey stated that when using BNPL services, they prefer installment payments, rather than paying the full amount later. Moreover, close to two-thirds of UK respondents admitted that BNPL services induced them to spend more, and half of those using the service had missed at least one BNPL payment.
Major BNPL service providers have initiated new projects on the European market during the health crisis
During the COVID-19 pandemic, Sweden-based Klarna, one of the main BNPL service providers, saw its customer base grow rapidly, as more than 20% of its users signed up in 2020. Together with steadily growing revenues, the company initiated new services and further market expansion, which resulted in negative net profits. In June 2020 it expanded its services to Spain and in February 2021 the company announced plans to offer banking services in Germany. Another serious BNPL player, Afterpay, more than doubled its sales, total income, active customer base, and significantly increased the number of connected merchants during the health crisis, according to the yStats report. Meanwhile, PayPal is also eyeing Europe, as in July 2020 it opened its BNPL services for French consumers. Despite the presence of some major BNPL service providers, recently the European region has seen several new players in the BNPL area, with many of them raising significant funds from various venture capital sources and other established companies.
Some regulatory authorities have become concerned about the accelerated activity of BNPL service providers
Consumers worldwide became increasingly attracted to the BNPL services because of the economic disruptions of the COVID-19 health crisis. The increased use of BNPL raised concerns of several governmental representatives, as the regulatory framework for the industry is still quite unclear in many jurisdictions. For example, the European Commission stated plans to update the current consumer credit agreements, considering the BNPL service providers activity; in the UK, the Financial Conduct Authority intends to introduce initiatives concerning the industry this year; and in Australia, where at the behest of Australian Securities and Investment Commission, the Reserve Bank of the country proposed new regulations. The regulators are mainly concerned about overspending by local consumers, and the lack of transparency of terms that BNPL providers apply, as detailed in the yStats.com publication.