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BNPL market expansion in recent years (expression toKlarna It’s now commonplace) has not gone unnoticed by credit card companies and payment processors. master Card When PayPal Launch your own BNPL offering.
Meanwhile, BNPL companies are looking to enter the credit card company space by launching an eye-catching credit card-style reward scheme.
Although the BNPL market is still smaller than the credit card market (in the UK, BNPL lending is about 10% of credit card lending), the BNPL market is torn apart by analytics firms. global data We predict that the BNPL market will exceed $1 trillion by 2030. apple and other big tech companies are integrating it into their ecosystems.
Some even suggest that the BNPL market could eventually overthrow the credit card market, fueled by the younger generation’s BNPL frenzy (especially its frictionless setup process) and credit card shunning.
Only time will tell, but there is no doubt that BNPL is proving to be a strong challenger to the credit card giants.
Ryan Garner Expert Associate Partner, Bain & Company‘s London fintech arm said: But in clothing and youth categories, BNPL is already challenging credit card dominance.
US BNPL Company affirm meis one of the newest BNPL players to offer reward packages to its customers and take advantage of the popular credit card loyalty program. Affirm Rewards is a slightly different rewards model than typical credit card programs, where customers earn points when making payments to the platform.
Earned points can be applied towards discounts on future Affirm BNPL loans at participating retailers. This is unlike credit card programs that tend to encourage high spending on travel and other types of rewards.
Max LevchinThe CEO and co-founder of Affirm, who is also a co-founder of PayPal, said: first company: “People wanting to make smart financial decisions for themselves and be rewarded in a way similar to credit cards is a pretty powerful incentive. Free flight.”
Other BNPL players are also mining this area. deferred payment Klarna has a similar scheme to reward customers for using BNPL.
But amid the cost-of-living crisis in the UK and Europe, questions have been raised about whether BNPL companies (and credit card companies) should reward customers who have borrowed money.
Garner said BNPL providers need to enhance their risk profiling during the current cost of living crisis, but the message is whether customers will use credit financing decisions at that time. It should be adjusted to help you make the right decisions.
However Dave Blair Group CEO, 11:FSAffirm, a financial consultancy, said Affirm’s move was a smart one and helped create loyalty and tenacity.
Mr Brear said: The credit provider’s job is not to teach people how to live, but to educate them about the financial products available.
Chris Dinga Payments analysts at GlobalData say a reward scheme could be beneficial to customers if it encourages them to pay on time. he said:
BNPL has been around for a while, but now that it’s been repackaged in digital form and the market is booming across Europe, BNPL providers are capturing potential credit card customers.
An example of duplication of services is Klarna, a vocal critic of the credit card industry, embedding its BNPL offering into a physical service. visa Cards and UK credit card companies timit We offer potential BNPL users 3 months interest-free on purchase.
Liz Edwards Chief Editor of Personal Finance Comparison Site, finder.com, BNPL has indeed acquired some potential credit card customers as well as created a new market of its own. As a result, functionality is starting to overlap.
Brear says the difference between BNPL and a credit card company is now “very minimal” to the average financially savvy customer.
However, Garner said BNPL companies embedded in the user experience of e-commerce stores still compete with credit cards in their ability to improve discovery, compare products and find the best deals before reaching checkout. are discriminated against, he said.
While the current BNPL market is not profitable (Klarna, AfterPay, etc. are not), there is little need for major credit card and payment companies to make money from their BNPL services.
Potentially in a stronger position than pure BNPL companies.
Mr Dinga said: Apple’s new BNPL solution follows this approach.
Meanwhile, Blair said credit card companies and payment companies could find success in offering BNPL services, which he said would be a “very small step” for PayPal. They had finance built in before that happened, so they already have the trust and customer base to make it a success.
Moreover, with BNPL regulation looming, credit card companies offering BNPL services are best suited to cope with this change.
Companies that already offer regulated credit, such as credit cards, will be subject to FCA approval to undergo stricter affordability checks and to comply with the new FCA rules on BNPL, Edwards said. Complaints to the Financial Ombudsman.
But do experts think the credit card market could be overtaken by BNPL? GlobalData predicts that by 2026 the UK credit card market will reach $87 billion in transaction value , BNPL is projected to reach $47 billion.
Brear said BNPL is unlikely to beat credit cards anytime soon. While millions of people carry credit cards back in his pocket as a payment buffer, they have the same level of trust-not-protection perception as his BNPL. Adoption rates vary widely at this stage, and the gap is in customer perceptions.
Mr Dinga said: While we expect the credit card market to maintain its position as a leading consumer loan provider, the BNPL market will continue to grow and become more mainstream.
Edwards said regulation could be an obstacle to BNPL’s progress.
she said: The question is whether consumers will eventually see it as credit.
