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BNPL in 4 points

Square acquires Afterpay for $29 billion. Scalapay's valuation rises to $700 million after the latest funding round. Upgrade will launch a Buy Now Pay Later (BNPL) solution during 2022. These are just a sample of relevant news posted on market in recent months under the BNPL “label”.

Buying a good or service by installments has always been a possibility offered to consumers but, in particular in the last two years, available solutions on the market have increased sharply. More than other technical forms, the delayed payment offered by merchant considering a lender input (lender that will acquire the risk ownership), is taking a relevant success. This formula is typically based on a merchant fee without costs for final consumers. Depending on the case, merchant fee is only variable or variable with an additional fixed fee.

Following 4 important points to deep dive BNPL phenomenon better.

1) Huge addressable value

BNPL solution features allow to offer installments on new sectors previously excluded, or less penetrated, by traditional credit, due to average purchase ticket or type of sector. Initiatives such as the Inspirock travel portal acquisition by Klarna, have to be read in this sense. Considering, as an example, the Italian market, there are over 20 high potential sectors that generate more than 95 billion of annual consumption potentially addressable by BNPL solutions.

2) Online/ offline

BNPL solutions are often described as an eCommerce purchase support. Certainly, they fit well with online shopping processes, but their potential also matches physical channel needs. In fact, there are sectors and customer targets, that will continue to stay on a purchasing model physical mainly. Here, a BNPL solution to be used on the merchant's POS/ app could be have a great potential.

3) Increasingly crowded market but still rooms of improvements

These solutions are crowding the market. Returning to the Italian example, starting from the second half of 2019, new entries has been accelerated strongly. In addition to the specialist players in this area, often coming from the fintech pool, new solutions have been proposed from “traditional” operators already well known in the consumer credit area. However, there is still room for improvements both in terms of market demand that innovation possibilities on solutions offered.

4) Regulatory watch is on the door

In Europe, regulators attention on this area is growing. European Commission has filed a draft revision of the new consumer credit directive, which evolves the sector regulation in many directions. The final aim is to ensure greater consumers protection and transparency also considering a more digitized offering scenario. Among others, one of the topics that could undergo a different regulation is precisely the BNPL. Will be key follow the approval process and, more the consequently national regulation adjustments.


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Sandro Salvoni

Sandro Salvoni


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12 May 2021



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