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Current state of the BNPL market in Spain

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...  

 

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Comments: (8)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 14 June, 2021, 13:181 like 1 like

Nice post. In survey after survey in USA, UK, etc., a majority of BNPL consumers attribute their preference for BNPL to "free credit" aka avoidance of interest and fees associated with credit card (which they do have). Yet, they let BNPL repayments to be drawn automatically from their credit card (where the issuer allows it). I find this counterintuitive since they will eventually fork out interest and fees when the BNPL installment gets transferred to their credit card. In my blog post BNPL Ain't Killing Banks. It's Making Them Rich, I alluded to this as a "quirk of consumer behavior". 

I see that credit card is one of the modes of BNPL repayment even in Spain. Any idea why BNPL consumers exhibit this contradictory behavior?

Pablo Lopez
Blog group founder
Pablo Lopez - Monitor Deloitte - Madrid 14 June, 2021, 22:50Be the first to give this comment the thumbs up 0 likes

Thanks for your comment S. Ketharaman - although I share your conclusion (contradictory behavior if repaying with credit cards) and I don´t share the fact that "the customers let BNPL repayments to be drawn automatically from their credit card". According to an Australian Gov survey, the 74% of buy now pay later users used a debit card or direct debit from a transaction account to make payments and many of them don't even have a credit card.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 June, 2021, 08:12Be the first to give this comment the thumbs up 0 likes

That's amazing because I'm quoting from your own post that people use credit card to pay off BNPL installments.

"...repayments are drawn from a customer's linked...  credit card."

Pablo Lopez
Blog group founder
Pablo Lopez - Monitor Deloitte - Madrid 15 June, 2021, 08:56Be the first to give this comment the thumbs up 0 likes

My quote: "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", those are the available options altought the option that is most used is debit card

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 June, 2021, 09:23Be the first to give this comment the thumbs up 0 likes

I highlighted Confirmation of Payee and Enhanced Remittance Data as two among Five Ways to Stimulate Electronic Payments back in 2013. (For some inexplicable reason, some of my posts, including this one, have suddenly become invisible.) Eight years later, we haven't seen much progress on either initiative. Like SCA and ISO20022, I wonder if CoP and ERD have also become fall guys of the pandemic outbreak.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 June, 2021, 09:24Be the first to give this comment the thumbs up 0 likes

Oops, I posted the above comment in the wrong post! I can't delete it, hope Finextra can do so on the backend!!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 June, 2021, 09:31Be the first to give this comment the thumbs up 0 likes

That's clear. I'm only curious about the cohort - however small or big it is - that does select Credit Card as the mode of repayment of BNPL installments. Like, do they like to kick the can down the road - or is there some other reason to explain their counterintuitive behavior?

Pablo Lopez
Blog group founder
Pablo Lopez - Monitor Deloitte - Madrid 15 June, 2021, 21:23Be the first to give this comment the thumbs up 0 likes

In my opinion, it is more related to the innovative UX of the BNPL providers or even the psychological aspect of delaying the total value of the purchase at the moment of the checkout. I'm sure most of the buyers that repay their BNPL debts with credit cards will re-think their future buying behaviors if they would reflect this counterintuitive behavior

Pablo Lopez
Blog group founder

Pablo Lopez

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Monitor Deloitte

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Madrid

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