Published:
Sep 18, 2021
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Acronyms abound - BNPL has taken the crown in 2021. As consumers and the fintech community continue to pile into the space, it looks like it is here to stay.
Buy Now Pay Later (BNPL) by all means has been around since the first recorded debt systems in Mesopotamia around 3500 BC and in its current form is really a 200-year old relic. Installment plans became popular when a growing number of essential — and expensive — consumer goods came into the market. These started with things like shovels used during the California Gold Rush in 1849, and went on to include refrigerators, sewing machines, and of course, the automobile.
With the credit card taking the share of daily purchases in the US - the revival of installment buying was sparked by the online purchase of large ticket items (think Peloton) and high-value fashion items. Fast forward (a couple of months) and BNPL options are available for small daily items, offline services, and even business transactions.
This “new” form of payment is great for customers and businesses alike. Buyers who may not qualify for credit cards are afforded “credit” at the point of transaction while businesses are increasing conversion and sales. Some reports indicate that more than half of consumers have already purchased with BNPL. Large retailers, who have long complained about the fees from payment networks, are all jumping in with the hopes of circumventing the oligopoly of Visa and Mastercard.
The market opportunity is large with some 53m adults in the U.S. lacking traditional credit scores. BNPL providers typically charge a higher merchant discount rate [i.e. the fee that is charged to merchants for processing debit and credit card transactions] in order to offset losses and payment fees. Skeptics point to a potential “credit bubble” and the potential for a surge in late payments.
Of all the acronyms sweeping our world of fintech and venture - there’s a good chance this one is not going anywhere (just like IRL).
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Alphabet Soup
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Industry News
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