Buy Now Pay Later (BNPL), with its Turkish equivalent, buy now, pay later, is a type of payment that has become widespread in North America, Australia and Europe, allowing the price of the product/service to be postponed for certain periods or divided into certain terms. Although it offers a commission-free installment experience, it is a surprising fact that companies that receive commissions according to maturities, amounts and even contracted workplaces are also in high demand. While it is widely used in some parts of the world, the fact that it is not even heard of in some countries shows how developable and customizable this subject is.
Where is it used?
Considering the usage rates, the prevalence of BNPL products is seen in Scandinavian countries, Australia, New Zealand, Germany, Netherlands, America and Canada, especially Sweden and Finland. In addition to these countries, due to some geographical features, there are companies working on the BNPL model in countries such as the UAE and Saudi Arabia in the Middle East, but their usage rates vary greatly.
The rate of use of BNPL in e-commerce is very high, such as 23% in Sweden, 19% in Germany, while it remains at only 2% in the USA. Despite this low rate, the USA is in the leading position with Germany in BNPL transaction volume due to its very high e-commerce volume.
It is estimated that today's e-commerce volume will increase 1.5 times in 4 years. When the forecasts that BNPL will double its share among the payment methods used in e-commerce are added to this, it is expected that the transaction volume of BNPL products will triple in just 4 years. There are many reasons behind the preference of BNPL, which has entered our lives in the last 20 years.
Why is it preferred?
With the acquisition of Afterpay, one of the well-established BNPL companies, by Square for an astronomical $29 billion, the use and future of BNPL began to be discussed a lot. So, why do people prefer this service?
• Fast, online membership and approval service
• Offering installment options to debit cards to consumers who do not prefer to use credit cards or do not have sufficient limits and use debit cards.
• Having an innovative service approach and digital and mobile compatibility influencing the younger generation
• It can be used simply, even in low amounts, which can be used as a loan, so to speak.
• It provides SKU-based separation not only in e-commerce environments, but also in POS devices.
There are many fintech companies that create a huge market for themselves in the field of BNPL, which has many rich reasons to be preferred. These fintechs have interpreted and somewhat personalized BNPL according to the needs, the conditions of the countries they are in and their own innovative understanding. Here are some of the major BNPL players that are global, market leaders or stand out for their features:
Klarna is the pioneering company that set out in Sweden in 2005 to offer its customers a "hassle-free payment experience", perhaps adding the concept of BNPL to our lives; With more than 900 thousand contracted workplaces and more than 90 million active users in 17 countries, it holds the leadership of the sector. The company, which makes a short credit rating research during membership, offers its users a 1-month deferred payment or 4 installments with 2-week intervals, with the first payment in cash. In addition to being able to be selected as a payment method at the time of payment, it also has an application with 20 million users, which can be directed to shopping sites and paid. The company, which does not charge the user with any interest, requests a credit/debit card to collect the payment from the user. In addition, it also offers in-store payment with QR or NFC.
Afterpay, which announced BNPL to the whole world after being sold to Square for $29 billion, was founded in Australia in 2015. While operating in 5 countries, it offers its users 4 installments with 2-week intervals. Having approximately 20 million active users, Afterpay also offers the opportunity to pay at contracted stores using QR.
Zip, another Australian origin company, was established in 2013. Unlike the shopping-based payment methods of other BNPL companies, it makes transactions through a credit card-like system at the end of the month. Depending on the size of the statement received at the end of the month, it divides the statements below $1000 into 3 installments without interest under the name of Zip Pay, while it offers a maturity of up to 48 months with a starting fee of $25 under the name of Zip Money for statements over $1000. It seems like a big plus compared to its competitors that it can provide membership from platforms such as Facebook without asking for any identity information, as well as offering the opportunity to pay by bank transfer.
Founded in the USA in 2012, Affirm stands out with its credit institution license. Unlike other BNPL companies, instead of receiving commissions from businesses, interest is earned from customers.
Steps of Big Companies on This Issue
Paypal, which became involved in the BNPL game in the USA by acquiring the BNPL company "Bill Me Later" in 2008, managed to reach a transaction volume of $ 50 billion in its first 10 years. Besides being able to divide the amounts between $30-1500 in installments and interest rates specific to countries and companies, it also provides services in countries such as France, Germany and England.
With the solution called Visa Installment, it is positioned as an infrastructure and technology provider so that players who lost the market with the BNPL trend can make installments.
Launching the system called "Pay Later" in India in 2020, Amazon also made it possible for its elite customers in the USA to make installments in their Amazon baskets, in partnership with Affirm in August 2021.
American Express started to offer a service focused on credit card statements with Pay It and Plan It, which they launched in 2018. In Plan It, a maximum of 10 products exceeding $100 on the credit card statement is offered, as well as the opportunity to postpone the payment of a maximum of 5 products under $100 to the next month in the service they call Pay It.
The size of the BNPL industry is easily noticed when we add the fact that 1 out of every 50 e-commerce transactions are made with BNPL today, when we add the more than 120 million active users of large BNPL companies worldwide. In addition to the consumers who turn to these platforms for their urgent and short-term needs, these companies are expected to adapt and customize the BNPL according to the conditions of the country, and it is expected to become more widespread, and it is estimated that 1 out of every 25 e-commerce transactions will be made through these platforms in 2024. Considering that the transaction volume of BNPL products will triple in just 4 years and the e-commerce volume is increasing worldwide, the existence of companies such as Klarna, which increased its valuation to 46 billion dollars, and astronomical figures will continue to be in our lives.
