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Buy Now Pay Later – Thematic Research

Retail finance has existed as long as there have been merchants selling goods. The latest innovation, commonly referred to as buy now pay later (BNPL), has actually been offered for a couple of decades. However, the combination of the service with mobile and credit at the point of sale POS both in-store and, more importantly, online has spurred its rapid growth among the shopping public. BNPL services offer to facilitate payments between merchants and their customers or suppliers via a short-term, typically interest- and fee-free installment plan. Any normal fees are typically charged to the merchant only, with the consumer charged very little or nothing for spreading the purchase payments out over a standard term. Early repayment is not penalized as the aim is to facilitate the purchase and spread payment by the consumer over multiple pay cycles.


While BNPL usage is concentrated among online shoppers, a key growth area has been in-store purchases. But as in-store purchases need to be made via a POS or mobile POS terminal, the spread of these terminals is crucial.

The business model for BNPL does not allow for widespread defaults or lengthy credit terms in most instances. The main driver of defaults is unemployment. So long as this remains low, the prospects for BNPL services are bright.

Age has been a major determinant of BNPL use, and the increased prominence of millennials in the economy means BNPL use should accelerate.

Reasons to Buy

Benchmark yourself against the rest of the market.

Ensure you remain competitive as new innovations and business models begin to emerge.

Learn about the key trends these digital players are targeting.

Understand the BNPL value chain, and the value it brings merchants and consumers.

Companies Mentioned

Afterpay, Affirm, American Express, Ant Financial, Bread, Blispay, Citibank, Divido, Klarna, hoolah, Mastercard, PayPal, Visa, Zip

Table of Contents



Technology trends

Macroeconomic trends

Demographic trends

Regulatory trends

Industry analysis

Market size and growth forecasts

The Nordics and Australasia are the most mature BNPL markets

Growth over the next three years will be robust in all markets barring the Middle East and Africa

Funding of BNPL by consumers will see little disruption to banks and card schemes

Consumer use cases


Deferred payment without fees

Purchase protection

Fraud mitigation

Increased purchasing power

Merchant use cases

Increased checkout basket size

Improved customer conversion/reduced checkout abandonment

Wider client base

Immediate access to funds

Fraud and default risk

Value chain


Consolation among BNPL players will accelerate

Network effects mean not all third-party BNPL providers will be viable

Pressure from banks and retailers will limit the expansion of third-party BNPL

Most consolidation in the short term will be M&A-related, but some providers will go bust

Global economic downturn will test the BNPL model

How consumers treat BNPL when their finances are pressured remains to be seen

The possibility of recession has grown in key BNPL markets such as Australia, the US, the UK, and Germany

Fraud detection and deterrence will be a crucial improvement

Traditional providers of retail credit will include features of BNPL

Third-party BNPL startups are sparking innovation from incumbents

BNPL means the death of large amounts of credit net interest margin

Events, services, and healthcare will grow as a BNPL market

The potential market for goods and services to be financed by BNPL is vast

Out-of-pocket healthcare expenses are a big opportunity in all markets

Invoice BNPL will grow as more SMEs adopt the service

Most BNPL is focused on B2C, but B2B purchases are also ripe for more flexible payments

Lending to business has been more robust and should provide ample opportunity for expansion

Companies section

Competitive analysis

Mergers and acquisitions


Supplementary data

GlobalData’s 2019 Banking and Payments Survey

Secondary sources

Further reading

Appendix: Our thematic research methodology


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