Payments are arguably the face of fintech. When you think about financial technology, it is easy to think about solutions which are making payments faster, easier and more accessible.
Buy now pay later (BNPL) has certainly taken the paytech world by storm. We previously discussed if the technology would be able to surpass credit cards due to its popularity. While the general answer was “no it is unlikely”, some experts suggested that should BNPL’s growth maintain its current trajectory, then it could be possible. This can only be done if the BNPL hype remains – but is it already over?
We reached out to the industry to find out.
Hype is not over. Financial education is needed
Dr. Kate Mielitz, accredited financial counselor, Beyond Finance, the financial education platform, suggested that the BNPL hype was not over. However, she noted the importance of financial education around the technology so more people could be aware of the booming technology they could be tempted to use.
“We need to do a much better job of educating the public about the pros and cons of credit cards and BNPL short-term loans. Foundational financial education and practice, such as budgeting and understanding how credit works, must be part of high school, trade school, and college curriculums. We need to require this as foundational education so more consumers are informed about the pros and cons of their purchasing decisions.
“Further compounding the issue is that if interest rates go down, consumer spending will likely increase. And through BNPL, consumers could feel that they’re much more flush than they are and get into a financial pinch.”
Hype is not over. It has reaffirmed its value since the pandemic
The pandemic accelerated BNPL’s adoption. However, many technologies that emerged during that time have since slowed their growth as hype has died down. This is not the case though for BNPL according to Tom Voaden, head of partnerships and channel sales at BR-DGE. He explains how it has evolved to match new consumer needs and in turn, kept its hype.
“Buy Now, Pay Later was one of the breakout payment innovations during the pandemic, but, nearly four years on, the technology remains an important and powerful tool for merchants and consumers. It is easy to write off BNPL as a pandemic phenomena, but like all alternative payment methods, BNPL has developed over time, reshaping itself so that it remains relevant and competitive in the eyes of the payment ecosystem.
“In the last 24 months, BNPL has reaffirmed its value to consumers as more people have been financially challenged by the rising cost-of-living. Not only have market players been able to support consumers with flexible short-term loans, but many have worked hard to create value-add services such as comparison or artificial intelligence functions to improve the consumer experience.
“While we expect to see tighter regulation of BNPL in the near future, this shouldn’t be a barrier to future innovation. For example, while the technology has penetrated the online market, many believe there is a strong opportunity in the years’ ahead to become a greater fixture in-store and develop an improved multi-channel offering for merchants.”
Hype is not over. The younger generation will ensure its success
“The hype is far from over,” said Irene Skrynova, chief customer officer of paytech, Unlimit. BNPL is a natural fit for those wanting to make their money go further she explained. “Economic headwinds show no sign of going away, so BNPL will continue to be a crucial tool in the belt of consumers. Customer onboarding processes will need to be as seamless as possible for retailers to reap the rewards of this growing market.
“The promise of cheap and easily accessible credit makes BNPL payments particularly attractive for Gen Z and millennials. The lack of friction when paying with BNPL is especially alluring when compared to the traditional process of acquiring a credit card.
“BNPL will remain a major growth market. Analysts predict that, by 2027, over 900 million people worldwide will regularly use BNPL. This growth will bring new entrants to the market, and competition will provide consumers with additional choices.
“The accessibility of BNPL can pose risks. Consumers must understand BNPL is credit, and that they need to proactively manage their debts to avoid late fees and credit score damage. Providers haven’t always communicated this clearly in the past, so it’s no surprise that clarity of communication is emerging as a key area of focus for regulators globally.”
Hype is not over. It’s growing
For Daniel Meyer financial services lawyer Freeths, it seems as if BNPL’s hype is only growing as younger demographics continue to adopt the technology. “The hype around BNPL is definitely not over – the sector in fact seems to be growing! The sector has seen larger, more established businesses take an interest, which shows that they see a sustainable and growing sector in the long-term.
“BNPL providers are well-placed to take advantage of new technologies such as AI and machine learning to further improve and tailor BNPL solutions to customers, enabling future growth. Many BNPL customers are also in the younger age bracket, meaning BNPL is definitely not a dying trend.”
