Spanish consumers have recently had the ability to pay for purchases in installments. Traditional in-store arrangements allow consumers to pay for purchases over time, and some retailers like El Corte Inglés or Media Markt have offered interest-free or deferred payment options for many years. In recent years, newer types of electronic installment payment arrangements – known as ‘buy now, pay later (BNPL) services – have become more prominent, and the use and acceptance of these services have grown rapidly. 

BNPL services enable consumers to purchase goods and services by paying part of the purchase price at the time of the transaction and the remainder to the BNPL provider in a series of installments. Unlike traditional lay-by, the customer receives their purchase immediately and the merchant is paid upfront by the BNPL provider. In most cases, customers use a mobile app to access these services, and repayments are drawn from a customer's linked debit or credit card. Some popular BNPL services facilitate borrowing of amounts up to 1,000€ to 2,000€ and may be free for consumers if installments are paid on time (otherwise late fees may apply) – that is, they do not charge interest or other comissions. Other BNPL services enable eligible customers to borrow larger amounts but tend to charge monthly fees. BNPL is mostly used for online purchases, though larger BNPL providers (i.e. Klarna, Afterpay or Affirm) are also focusing on expanding adoption for in-store purchases (which operates via the provider's app by generating a scannable barcode or QR code). More recently, many providers have developed BNPL services that issue virtual cards through the provider's mobile app that can be used more widely for in-store payments, as well as online transactions, at merchants that accept card payments.

The strong growth in the use of BNPL in recent years in Spain suggests that an increasing number of people view these services as a convenient and cost-effective way of making purchases. There has also been an increase in merchant adoption of BNPL services for both online and in-store transactions (Scalpers, etc.). 

Several players have entered the Spanish market through different strategies:

• Organic entry of top BNPL players: Klarna
• Inorganic entry of top BNPL players: Afterpay (acquisition of Pagantis)
• Inorganic entry of Spanish Financial Institutions: Wizink (acquisition of Aplazame)
• Organic entry of Spanish Financial Institutions: Sabadell
• Organic growth (i.e. Fintechs): SeQura

According to the English BNPL provider, Butter, the Spanish BNPL market size accounts for almost 1.22Bn€, as the 13th largest market in the world with an estimated penetration of 2% of the total e-commerce turnover. 

Additionally, according to Oney, 40% of the merchants offer a BNPL payment option in their checkout. Therefore, there is still a big white space to cover...  

Disclaimer

The opinions expressed in this publication are those of the authors

Author

Pablo López Gil-Albarellos