Buy Now, Pay Later (BNPL) is a mirror reflection of the ever-growing demand for digital consumer financial products. It has become synonymous with the “Pay in X” or installment model, catering to the needs of the Fast Fashion sector. This trend was driven by a younger, digitally-savvy demographic, who sought affordable, trendy clothing that would dazzle on social media, but only for a limited number of posts.

BNPL’s Digital Transformation

Initially, BNPL providers raced to secure a foothold in the market by integrating with various platforms and merchants. They enticed merchants with promises of offloading risk while attracting a valuable customer base with increased purchasing power. These seamless and transparent transactions not only brought consumers into the provider’s ecosystem but also laid the groundwork for one-time virtual cards, generating additional affiliate revenue and interchange earnings.

From Fast Fashion to All-In-One Apps

The consumer app engine has since grown, with leaders like Klarna monetizing advertising and envisioning super apps that could rival giants like Uber and Instacart. In addition to apps and online checkout options, BNPL providers have introduced physical cards to boost transaction frequency and consumer loyalty. Meanwhile, platforms are leveraging BNPL functionality to draw digital-first customers into their expanding ecosystems.

BNPL: A Financial Lifeline

Today, BNPL Installments, and to a lesser extent interest-bearing solutions, are evolving into tools to help consumers navigate a world of rising interest rates, inflation, and economic uncertainty. Ideally, BNPL should not be used for essential expenses like fuel or groceries. However, compared to payday loans, high-interest credit cards, or overdraft fees, it can often be a more reasonable alternative.

Installments still account for a minority of online transactions and represent a tiny fraction of offline and in-store purchases—Apple itself has not cracked the code for in-store pay-over-time. Nevertheless, BNPL remains a valuable option for consumers due to its convenience and transparency.

2024 BNPL

In the upcoming year, we can expect increased attention on white-labeling BNPL consumer lending for financial institutions (FIs). Venture capitalists, platforms, and small and medium-sized businesses will delve deeper into:

• Domestic and cross-border B2B solutions.
• Innovative combinations of customizable technology and lending.
• Orchestration tools facilitating broader adoption of pay-over-time solutions.

As the world becomes more comfortable with digital lending and grapples with economic challenges, the appeal of instant BNPL gratification will persist.

Innovative BNPL Solutions

Examples of innovative, sector-targeted BNPL solutions include:

• StretchBill, which locks in travel costs, including short-term vacation rentals, protecting against price surges.
• Sunbit, offering dealership and 1stMile independent shop solutions to ease the burden of unexpected auto repairs.
• PayZen, addressing healthcare affordability issues.

Thriving Amid Economic Uncertainty

Economic challenges, seamless user experiences, and the growing acceptance of digital lending among older generations will further propel BNPL—both in terms of Installments and APR-based offerings—as a financial tool that, while still a minority share of total consumer spending, is far from fading into obscurity.

BNPL is not on the decline; it is evolving to cater to transactions that truly matter to consumers.

About the Author

Nicholas Beardsley specializes in developing payment products for Point of Sale and Fintech clients, while also providing market analyses for firms competing with or selling to industry leaders. He has worked with prominent clients such as Visa Europe, Revolut, Chargeafter, and Skeps. In previous roles at Klarna, PayPal, and WorldPay, he led global teams that forged integrated partnerships involving more than 300,000 small and medium-sized businesses, resulting in over $200 million in annual global revenue.

If your organization seeks to be part of the ongoing BNPL innovation, here’s how you can get involved:

2023 Lenders Summit

The evolving landscape of the BNPL sector has brought about a multitude of opportunities for lenders to service consumers in new and seamless ways. Engaging with the organizations leading and innovating within the sector and beyond makes the upcoming 2023 Lenders Summit a must attend event. Taking place on November 1st at the MaRS Discovery District in downtown Toronto, the focus of the event will be on networking, partnerships, and driving innovation in the lending sector. 

From Banks and Credit Unions to best-of-breed vendors from the fintech ecosystem, the 2023 Lenders Summit is the hub for networking and business partnerships across all consumer and commercial sectors. Main themes include fraud technology, Identity Verification (IDV), financial data solutioning and supporting new-to-Canada and new-to-Credit.

Sponsorship: A variety of sponsorship opportunities that will help position your organization as an industry leader are still available! Contact dean@canadianlenders.org for further information. View the Sponsorship Deck here. 

View the agenda and register your organization here