BNPL bubble? What bubble?
The faltering economy is behind an uptick in consumer BNPL usage in the US and UK but is also putting profit pressure on BNPL operators. UK public sector workers are using BNPL to ease economic woes. But, Mondu bagged €20 million for B2B BNPL, while Italy’s Mediobanca purchased Soisy and invested in HeidiPay. Down under, Australia’s finance minister plans to regulate BNPL loans like other credit products.
Splitit’s white-label BNPL is picking up steam with retailers. Although credit reporting agencies enabled BNPL reporting, operators resisted because of the possible impact on consumer credit ratings due to different tracking and reporting of payments. 37% of US consumers used BNPL in 2021 though research shows a slight decrease to 30% this year. However, that hasn’t stopped the growth of “marry now, pay later” company, Marro.
Higher interest rates threaten the buy now, pay later bubble
Higher borrowing costs will test the resiliency of BNPL. Block, via its e-commerce and point-of-sale (POS) subsidiary Square, added BNPL to its payment platform in Canada. Block is betting that the new interest-rate backdrop will separate the strong from the weak, as financial technology companies that are overly reliant on BNPL become prey for companies that offer a wider array of financial services. Expect consolidation ahead. Financial Post
Wild West period over for buy now, pay later sector
If the plummeting share prices and rising bad debt weren’t enough to cause stress in the BNPL sector, tight new lending restrictions will frighten investors and operators. Treasury is expected to deliver an issues paper in the coming weeks, bringing Australian BNPL merchants in line with regulations passed in NZ, the US, and the UK. Financial Services Minister Stephen Jones said the Government would amend national credit laws, so BNPL services are regulated as credit products. Channel News
Berlin-based Mondu bags €20M to provide BNPL payment solutions to B2B companies
Berlin-based Mondu, a fintech company that provides a BNPL solution for B2B merchants and marketplaces, announced it raised €20M in a debt round from German bank Vereinigte Volksbank Raiffeisenbank. Mondu will use the loan to support the company’s further expansion in domestic and international markets and to develop more products. Mondu also launched Split Payments allowing business buyers to divide purchases into equal, interest-free payments – with no hidden fees. Silicon Canals
Italy’s Mediobanca snaps up BNPL fintechs
The consumer credit arm of Italian investment bank Mediobanca Group made two fintech investments designed to boost BNPL operations. Mediobanca’s Compass unit has acquired Italian fintech Soisy and bought a 19.5% stake in Swiss outfit HeidiPay. Soisy specializes in loans for goods and services using e-commerce platforms. HeidiPay builds digital platforms to support e-commerce BNPL for distributors and luxury brands. Finextra
Splitit sees early success with white-label Buy-Now-Pay-Later product
Splitit’s so-called white-label installment payment product has increased shoppers’ average order size at some early adopter merchants. The Atlanta-based BNPL operator in April ditched its brand-based strategy allowing merchants to use its service at check-out under their own label. Splitit utilizes untapped credit on customers’ existing credit-card accounts so merchants can offer interest-free installment plans without pausing for credit checks or product registration. MarketWatch
Buy now, pay later services not reporting payments
Earlier this year, Experian, Equifax, and TransUnion began allowing BNPL companies to report user payments, but months later, major players have yet to do so. The reason is a test cited by the Wall Street Journal, where a credit reporting agency reviewed more than 130 million BNPL loans and other short-term payment plans and found that 57% of the consumers could experience a material decrease in their credit scores that could remain for more than a year, despite making their payments on time. Investopedia
UK public sector workers turn to BNPL amid real-terms wage cuts
With soaring inflation and a cost-of-living crisis gripping the nation, public sector workers in the UK are feeling the pinch. Latest government figures show inflation hovering around 10%. Against this backdrop, researchers at the University of Edinburgh found that 60% had used buy now, pay later loans at least once to make ends meet. In fact, one in 10 initially rejected for a more conventional loan went on to secure credit from BNPL firms. PYMNTS
BNPL widens its net to capitalize on consumers’ rising living costs
BNPL products aimed at helping consumers pay for necessities are becoming increasingly popular as the rising cost of living wears away at consumers’ budgets. However you spin it, BNPL is adding to consumers’ debts. That can exacerbate shoppers’ financial woes by normalizing unsustainable borrowing. And as the economic picture darkens, BNPL providers may also struggle to get those loans back as the likelihood of customers defaulting jumps. Insider Intelligence
37% of Americans used BNPL in 2021, and now it’s 30%
The BNPL market may be in trouble. According to an Aug 2022 Nerd Wallet & The Harris Poll survey, BNPL usage among Americans has declined 7% from Sept last year. The slight decrease of 7% may not seem like a big deal. Still, paired with recent news of vendor layoffs, CFPB regulatory scrutiny, and a possible economic recession looming, we’re concerned with what’s on the horizon. The survey showed 30% of Americans used the product in the past 12 months, with an average usage of six times. Payments Journal
Marry Now, Pay Later: New services put weddings on installment
The “buy now, pay later” approach has infiltrated the wedding industry via new programs created specifically to finance events. Maroo allows couples to pay its network of vendors in installments over a 12-month period, similar to how “buy now, pay later” programs offered by companies including Afterpay and Klarna. The wedding industry is worth more than $100 billion, and the average cost of a wedding in 2021 was $28,000, according to a nationwide survey of 15,000 couples. The New York Times