Countries Covered: Australia, Belgium, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, India, Indonesia, Italy, Japan, Netherlands, New Zealand, Nigeria, Norway, Philippines, Poland, Portugal, Singapore, Spain, Sweden, Thailand, UAE, UK, USA
Publication Date: 06/04/2021
Questions Covered in the report:
- What regulatory measures are various authorities to take in 2021 regarding BNPL services?
- How can retailers benefit from offering BNPL services in 2021?
- What were the BNPL user penetration rate in the US and the share of users who missed a payment in December 2020?
- What startups are expected to compete with the established BNPL service providers in Europe in 2021?
- How did the BNPL landscape look like in Africa in 2020 and what were the main challenges for the providers?
During the COVID-19 pandemic, consumers and merchants created additional demand for BNPL services: new yStats.com report.
Consumers worldwide are increasingly opting for BNPL services, but this sometimes comes at high costs
According to figures cited in the new yStats.com report, the majority of BNPL users worldwide are of the younger generations. For instance, in a March 2021 survey in the USA, close to two-thirds of respondents in the age group 18-44 at least once opted to use a BNPL service. A similar trend was also observed in Australia and other countries. Furthermore, among the top reasons to use BNPL, consumers in several countries named zero interest rates and transparent payment plans and conditions. Moreover, in the UK, over seven in ten respondents in a November 2020 survey stated that when using these services, they prefer installment payments, rather than paying the full amount later. Nevertheless, the BNPL services do have some clear downsides for the consumers, as alone in the USA, a significant share of BNPL users have already missed at least one payment, while approximately two-thirds of users had their credit card at more than 75% of the maximum limit at the moment of the first BNPL transaction
Amid the coronavirus pandemic, various authorities became concerned about the accelerated activity of BNPL service providers
Consumers worldwide became increasingly attracted by 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 frameworks are still quite unclear for the industry. This happened, for example, in Europe, as 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 the exact terms that BNPL providers apply, as detailed in the yStats.com publication.
Despite major BNPL service providers accelerating their market shares, local ones are still stepping in
During the COVID-19 pandemic, Klarna, one of the main BNPL service providers saw its customer base grow rapidly, as more than 20% of its users connected in 2020. Despite steadily growing revenues, the company initiated new services and further market expansion, which resulted in negative net profits. 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. Similarly, Affirm, which mainly operates in North America, managed to raise the number of active users by about 50% in 2020, compared to 2019. Additionally, the company presented its ambitious plan to nearly double its revenue by the end of the 2021 financial year. Nevertheless, in many countries where these and other major players are present, a significant number of BNPL newcomers emerged right before and during the pandemic, which attracted substantial capital investment, according to the yStats report.