The number and type of companies offering BNPL has steadily increased globally. With higher inflation, BNPL can serve as a significant discount to the consumer but ends up negatively impacting merchants or lenders. BNPL thrived in a low interest rate environment but transitioning to a model where inflation is a key consideration will require some restructuring. While regulation is debatably the single greatest uncertainty for BNPL, rising interest rates and a crowded competitive landscape also raise significant concerns. will reach an outstanding balance of $326 billion by 2026. Striking the right regulatory balance is crucial to make BNPL beneficial for merchants, lenders and consumers in the U.S.Įuromonitor estimates that BNPL and other personal lending in the U.S. With repeated checks, the lending channel could end up lowering consumers’ credit scores and eliminate the convenience that is currently driving the lending channel.
#Buy now pay later verification#
This layer of verification could also raise the cost to lenders and push out consumers that are unbanked due to a poor credit score. One possible solution would require reporting loans to credit scoring institutions. Finding the balance between transparency and education is going to continue to be a key challenge.
Offering the necessary education and transparency could alleviate this risk but would likely raise the cost to lenders. However, this segment is most likely to have a low level of financial literacy and therefore is vulnerable to default or unfair lending terms. However, several markets are expanding rules and oversight of the sector.īNPL can increase access to lending for unbanked or financially underserved consumers. Initially, there were few limitations for BNPL providers from a regulatory point of view. Regulatory and competitive challenges pose threats retail sales in 2026, up from 26% in 2021, amounting to an increase of $468 billion in spending. According to Euromonitor, e-commerce sales will account for 36% of total U.S. BNPL can significantly broaden potential buyers for a retail channel, enhance the customer experience and build loyalty.ĭespite recent gains, there remains significant opportunity for BNPL in the digital space. But sustained growth will be driven by older consumers as well. Tech-savvy millennials and Gen Z customers were the key first adopters of this lending alternative.
increased by 65% from 2019 to 2021 to reach $787 billion.īNPL offers a no-cost financing alternative, which is particularly attractive for cost-conscious shoppers. According to Euromonitor International, total e-commerce sales of goods in the U.S. Low interest rates and merchants desperate to maintain sales created the perfect environment for BNPL and offered a way for several retailers to get around lower, or completely absent, in-store sales. Online spending surged during the pandemic and partially drove the uptake of BNPL.
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