On this week’s episode of News & Views, The Fintech Times Podcast team discuss how BNPL has made learning to drive more affordable for people across the UK; Norfolk’s flourishing fintech sector; and China’s efforts to lead the way towards a completely cashless future.

Francis kicked off the conversation by discussing the huge costs associated with learning to drive; and how recent years from Payl8r and PassMeFast caught his eye. The trio delve into their personal experiences when learning to drive and discuss how impactful the BNPL solution could be for others trying to pass their driving test.

Next, Polly, Francis and Tom delve into recent successes enjoyed by the Norfolk fintech sector. The podcast team break down the difficulties experienced by regions in the UK outside of London when trying to bolster their fintech ecosystems, particularly amidst difficult macroeconomic conditions.

Finally, China’s prospects of going cashless takes centre stage, as the trio reflects on the rapidly increasing adoption of digital wallets, as revealed by new Euromonitor research.

Listen to News & Views Podcast on your favourite platform:

    

Read the articles discussed in this episode:

PassMeFast Reflects on 3 Years of Affordable Driving Lessons Following Payl8r BNPL Integration

Norfolk’s ‘Flourishing’ Fintech Sector Set For £100Million Valuation by 2027; Reveals Tech East

China Leads the Way Into a Cashless Future, With 70% of Consumers Using WeChat Pay Daily

Another buy now pay later (BNPL) firm has decided to call it a day as Laybuy has put itself up for sale. The announcement has come following a turbulent time for the company as its valuation plummeted from a valuation of £230million in 2020 to £5.4million in 2024. There have been various reports about the struggles of BNPL firms as regulations tighten, so we reached out to the industry to uncover what is needed for firms to survive.

Laybuy is not the first BNPL whose value has taken a dive. In Q1’23, the Australia-based BNPL Openpay announced it was going into receivership following an all-time high total transaction volume. Additionally, in Q4’23, ZestMoney, the Bengaluru-based BNPL also announced it was shutting down following an attempted revival under new management.

Since the pandemic, BNPL has been an increasingly popular payment method. The idea of allowing users to make interest-free payments over time without a credit check was a resounding success. However, a lack of clarity surrounding the fine print and the fees that would be paid on late payments quickly began to haunt BNPL with many users blaming the service for falling into debt.

Nonetheless, when used responsibly the payment method can be very helpful to users and provide them with a financial lifeline; users are becoming increasingly aware of this. Research from Juniper Research has revealed that by 2028, the BNPL userbase will increase by 107 per cent to, from 380 million users in 2024.

The state of BNPL in 2024

Juniper Research found that despite fintech companies commanding the BNPL market for years, 2023 saw a major shift, as superapps and banks gained traction. WeChat and Grab are notable superapps offering BNPL to users, embedded within platforms offering numerous products.

Klarna recognised the potential of superapps; transforming its app into one. In future, the market will see not only more superapps offering BNPL, but consolidated retail experiences tailored to consumer demand; altering market shares significantly.

When it comes to banks, American Express launched its BNPL solution in late February. However, it was not branded as a BNPL product – instead it was called ‘Plan It’. ,

Not every bank and financial institution is finding success with BNPL though. In March 2024, NatWest announced it was closing down its BNPL service due to low usage.

This makes it difficult to judge the success of the future of BNPL: while some firms are finding success and exploring new integrations, others are turning away from the solution altogether. To ensure that the latter doesn’t completely take over, we asked the industry what was needed to ensure long-term success for BNPL firms and those offering it.

Education and regulation work hand in hand

Justin Passalaqua, managing director, North America at Worldline, the payments organisation notes how organisations must listen to their consumer desires. Following this, they must ensure they properly educate consumers on how to use their services, all the while remaining compliant.

“Several strategies can help the BNPL industry recover in the market. Consumer education must be prioritised. Many consumers lack awareness of responsible spending practices when utilising BNPL services, potentially leading to overextension and budgetary challenges. Providers should offer detailed information on making financially sound purchases including disclosing all fees and sharing best practices for using installment payments.

“Industry regulation is needed to protect both consumers and BNPL providers while allowing for market growth and healthy competition. Regulation could include fee and interest limits, consumer affordability assessments, and audits of advertising and contracts. As BNPL moves into niche sectors such as healthcare, travel, and recreation, customer education and regulation become increasingly important.

“As newer payment methods become popular, the demand for innovation increases. BNPL providers must listen to consumer needs and adapt to evolving trends and preferences.

“Risk management needs continuous improvement to protect both providers and their customers for BNPL to remain a sustainable option. Consumers and providers need to keep high-interest rates in mind and navigate the impact on BNPL usage.

“BNPL has soared in popularity as a payment method. If both consumers and BNPL providers exercise caution, demand regulation, and increase financial literacy, the trend may continue to boom for years to come.”

Creating a more efficient system

Tech can be the solution to ensuring BNPL longevity explains Kathy Stares, executive president of North America, Provenir, AI-powered credit risk decisioning platform. She says: “An advanced risk decisioning foundation helps ensure BNPL providers aren’t losing revenue to default and fraud, while stemming revenue loss by avoiding unnecessary data calls and bloated processes. Eliminating excess data ensures every data point is earning its place and adding value to decisioning.

“Additionally, the use of artificial intelligence and machine learning enables analysis of decisioning processes. Are there redundant data sources? Are they the right sources for your target market? Is each data point coming at the right step in the process? In short, how effective is your data? With embedded reporting, organisations can continuously optimise their strategies to keep pace with the needs of the business.

“These efficiencies are key to long-lasting BNPL success by reducing cost on the backend and minimising both customer default and churn rates. Running more efficient processes that can increase application volume and more accurately define affordability, provides the ability to serve more customers who are more likely to pay on time.”

Cue open banking

Suzanne Homewood, MD of decisioning at Moneyhub, the data and payments fintech, explains why open banking holds the key to help BNPL.

“Short-term lending and BNPL are missing a trick.  They have been lending to customers, playing on the ‘want it now’ drug of late-night shopping, and more recently have started to support purchases of everyday essentials as people struggle with the cost of living crisis.

“However, with no check on real affordability to repay in three months, the unsuspecting customer can find themselves with hefty interest repayments or even a debt collection call for a pair of trousers that remain unworn.  For the BNPL companies, this is reputational damage, and consumer harm, both of which (quite rightly) create a storm of consumer concern and market suspicion.”

Homewood continues: “One solution for the BNPL market to regain trust and confidence, is to introduce open banking affordability, not just once at application, but across the whole period of the short-term loan.  Long-term unsecured lending is seeing a 48 per cent improvement in first bill payment success, and a 33 per cent improvement over the first three months by using open banking affordability to check for funds and check ongoing affordability.

“For customers who are happy to consent for this 90-day sharing of data, they have the support of the lender to be able to detect early when things change, and step in with alternative options, negating debt recovery costs, and increasing customer satisfaction.

“If BNPL companies adopted this solution, they could create a deeper relationship with customers, make their products truly reflect the customers ability to repay, whilst still running a profitable business, and using data to identify where else they could offer short-term relief, in a sustainable, ethical and customer outcome focused way.”

Everyone must benefit 

Ultimately for BNPL to see long-term success and reach its potential, both consumers and merchants need to be winners. Tom Eyre, co-founder and co-CEO of Loqbox, the financial health platform focused on credit says: “BNPL regulation will only be worthwhile if it works in the interest of both consumers and businesses.

“Of course, some BNPL players say regulation will reduce the amount of innovation in the space. But if they were doing the right things by their customers from the start, they wouldn’t be complaining about regulation, because they’d have been self-regulating anyway.

“But regulation should not be a knee-jerk reaction in response to a backlash against STHC credit, BNPL or any other new business model in what is clearly an incumbent-heavy space such as financial services.

“There have been numerous calls for a wholesale replacement of the Consumer Credit Act (the “CCA”), the legislation that underpins the consumer finance industry. I am extremely wary of regulatory revolution vs evolution. The financial services sector in the UK is one of the best in the world. It relies, in part, on clearly understood, well-defined regulation that has stood the test of time.

“This regulation forms the foundation of many established products and services. Wholesale change of regulation in the name of revolution in support of innovation feels like a potentially risky prospect.

“The Treasury had until recently been proposing a removal of the exemption that many BNPL players rely on to offer their products outside of the regulatory perimeter. Such a change seems like a sensible evolution of the CCA and, when combined with the nascent changes in regulatory approach brought on by the new Consumer Duty rules, it’s hard to imagine a world where regulated BNPL products do not take their place as a welcome part of a well-running financial system.”

Fierce buy-now pay-later competition among payment card brands and independent providers is expanding conversion opportunities for merchants. By layering additional services onto existing rails, Visa, Mastercard, Discover, and American Express became global technology platforms. Similarly, independent BNPL providers first offered consumer financing and then expanded into apps, embedded commerce, and payment card issuance.

In recent interviews, industry analysts and providers shared perspectives on how buy-now pay-later evolved into broader capabilities, enhancing consumer and merchant experiences.

Embedded Commerce

Iconic credit card brands share a crowded stage with cryptocurrencies, digital wallets, and alternative payment schemes, each with its own value proposition and target demographic. Half of U.S. consumers use credit-card alternatives such as PayPal, Apple Pay, Venmo, and Cash App, according to Miles Tullo, managing director of banking and payments at J.D. Power and author of its 2024 “Digital Wallet Satisfaction Study.”

Tullo expects digital wallet platforms such as Apple Pay Later to continue scaling through diversified product and service offerings despite uneven merchant acceptance.

“The Apple Pay Later user tends to be younger, more mass affluent, and financially healthier than other buy-now pay later-users,” he said, noting that Apple Pay Later is embedded in the Apple wallet, providing users with a single-access view of multiple transactions.

Pat Suh, senior vice president of revenue at Affirm, a BNPL provider, cited embedded commerce as a key growth driver. “Growing with our merchants is a priority for Affirm,” he said. “Most of our volume comes from our merchant and partner integrations. We are constantly looking for and executing opportunities to deliver even more value for them, from rolling out new features and products to optimizing our integrations.”

Suh stated that Affirm has integrated with Shopify and payment platforms such as Stripe and Amazon Pay, enabling merchants to add Affirm as a checkout option with a few simple clicks. This has helped Affirm reach merchants and consumers at scale, he explained.

Payment Card Issuance

While most of its volume and users come from merchants and partners, Affirm is also growing its direct-to-consumer revenue through Affirm Card, which Suh described as a hybrid, combining physical card ease of use with virtual card flexibility and transparency.

“Our DTC business grew by 51% year-over-year to $2 billion in fiscal Q2 2024,” he said. “Our total volume grew by 32% — four times the rate of overall ecommerce growth for the period as we continued to take share and extend our reach.”

Affirm Card is accepted online, in-store, or wherever Visa is, Suh stated. Users can request a payment plan in the app before checking out, link their bank account to pay with the Affirm Card, or use the app to request payment plans for eligible purchases after swiping or tapping.

“Affirm Card users transact much more frequently than the rest of our base,” he said. “The card has increased our penetration in categories we did not historically address, such as everyday purchases and restaurants.”

More Competition, More Choice

Bryce Deeney, CEO of Equipifi, a BNPL provider for banks and credit unions, suggested the Affirm Card poses significant challenges to incumbent financial institutions.

“Companies like Klarna and Affirm acquire customers at the point of need for that one buy-now pay-later purchase by offering an alternative to the bank or credit union card,” he said. “And once the consumer is approved and downloads the app, these companies try to win the entire relationship — a major threat to traditional issuers.”

Deeney noted that merchants may have similar concerns. If consumers can get BNPL with a click, what stops them from shopping in a digital banking app instead of a merchant’s website?

Nonetheless, despite fierce competition, he said BNPL providers, financial institutions, and merchants ultimately want the same thing: to ensure customers have positive experiences with their brands and payment products.

“As long as consumers have easy access to credit and cash flow and merchants stay top of mind with their customers, that’s the world where everybody wins: consumers, issuing banks, and merchants,” he said.

Egypt has taken its next leap forward in enhancing access to finance for both banked and unbanked consumers in Egypt. It has been able to achieve this following a partnership between Network International, the digital commerce enabler across the Middle East and Africa (MEA), and Souhoola, the fintech solutions provider, in turn enabling merchants to offer buy-now-pay-later (BNPL) payments at networkpay point of sale terminals. 

Network International launched networkpay, it’s direct-to-merchant service in Egypt last year to offer various channels of acceptance including face-to-face payments, digital payments and online payment. It serves 2,500 merchants in the region. Meanwhile, Souhoola has over 130,000 users and a network of more than 1,600 merchant partners.

Ahmed Samir, regional managing director for merchant services – Egypt, Network International said: “By partnering with Souhoola, we’re facilitating seamless digital payments. Furthermore, we are also accelerating financial inclusion. This partnership aims to empower merchants and consumers alike and stimulate a more accessible and convenient payment ecosystem in Egypt.”

Using Souhoola’s BNPL option on networkpay POS devices, customers can conveniently split their payments into highly flexible instalments of up to 60 months. In doing so, they can purchase electronics, furniture, automobiles, and even pay school fees.

Incentivised by increased consumption, the BNPL payment industry has recorded noteworthy progress over the last 12 months in Egypt. BNPL payment adoption is expected to grow steadily. It reecorded a CAGR of 29 per cent during 2023-2028, according to a report by Research and Markets. Additionally, BNPL Gross Merchandise Value (GMV) is expected to reach USD from $1.1billion in 2022 to $6.1billion by 2028.

This partnership between Network International and Souhoola aims to spearhead this growth. In turn, it will advance financial inclusion and transform the digital payments landscape in Egypt.

Ahmed El- Shanawany, managing director, Souhoola, said: “Together, we are committed to driving innovation in payment solutions. We want to enhance financial accessibility for consumers.”

Galileo Financial Technologies, a fintech firm owned by SoFi Technologies, is expanding its Buy Now, Pay Later (BNPL) offering that enables banks and fintechs to offer cardholders new post-purchase instalment payment options via their existing debit or credit card account.

In addition to its Galileo BNPL pre-purchase offering, the new API-enabled BNPL post-purchase offering is built for banks and fintechs looking to seamlessly deliver their customers a more flexible financing opportunity. It supports repayment options for both existing debit and credit programs within established financial relationships.

BNPL is forecast to surpass 900 million global users by 2027, presenting a tremendous market opportunity for banks and fintechs.

David Feuer, chief product officer at Galileo, commented: “This new offering bridges the gap between cards and loans and allows banks and fintechs to establish and deepen customer relationships with innovative, flexible financing options for both credit and debit customers. By expanding pay-over-time opportunities, post-purchase financing is ushering in a new era of responsible lending.

“Enhancing the accessibility of payment options is a fundamental aspect of our commitment to promoting financial inclusion. With that in mind, one of the major perks of the post-purchase BNPL offering is that it works across all merchants where credit and debit cards are accepted today.”

Post-purchase BNPL benefits

Galileo explained that post-purchase BNPL has key benefits for banks, fintechs and their customers:

• Market differentiation: FIs and fintechs can add value to their debit and credit programs with a flexible, transparent financing model.
• Entry point into lending: Galileo’s post-purchase BNPL service provides a streamlined path for fintechs that are currently only in the deposit space to enter the lending space.
• Drives incremental revenue: FIs and fintechs can tap into additional revenue through installment fees.
• Financial access: Post-purchase BNPL financing previously exclusive to credit accounts can be extended to debit accounts.
• Transparent payment terms: Unlike traditional credit card interest, post-purchase BNPL with instalment fees gives consumers the benefit of seeing the total cost associated with each purchase before committing.
• Flexible financing: Post-purchase BNPL transforms conventional debit into a dynamic financial tool, offering the flexibility to responsibly and efficiently manage money.

Post-purchase buy-now pay-later could be a massive opportunity for retailers, according to J.D. Power’s BNPL satisfaction survey, published Feb. 29, 2024.

In a survey of 4,135 U.S. consumers, American Express, Chase, and Citi outperformed other category leaders in three key areas: reasonableness of terms, ease of use with digital account management, and security of account information. The second annual study found overall satisfaction with BNPL had grown by 16% in just one year.

J.D. Power’s findings suggest that retailers may be leveraging BNPL without even knowing it. Unlike Klarna, Sezzle, and other third-party solutions that appear at checkout, Plan It by American Express, My Chase Plan, and Citi Flex Pay are not part of the checkout stream. Merchants never see these direct-to-consumer offers or know when post-sale transactions convert to buy-now pay-later plans.

Miles Tullo, managing director of banking and payments at J.D. Power, was not surprised to see card issuers pull ahead in the BNPL race. “It’s going to be very hard for Affirm, Klarna, and other brands to build a buy-now pay-later solution and scale,” he said. “Because they have to go merchant by merchant and get them to say, ‘Yes, I want your checkout button on my website.’”

Tullo acknowledged, however, that third-party providers have also been “strong out of the gate” and are winning back share in interesting ways. Klarna, for example, has launched a subscription service, “Klarna Plus,” and a new authentication method, “Sign In with Klarna.” And the newest entrant in the study, Apple Pay Later, started last year and is growing quickly.

“Apple Pay is accepted in a lot of places, so Apple didn’t need to go out and convince merchants to accept this payment method because it rides on the Apple Pay transaction and the acceptance is there,” he said. “Having a massive consumer audience makes it easy for Apple to offer up an Apple Pay Later option to a consumer who’s just used Apple Pay to make a purchase, and the Apple brand, with its loyal following, is growing very quickly.”

Built to Scale

Massive customer bases and established rails put card issuers on the inside track, Tullo added, noting that post-purchase BNPL transactions are free to merchants and require no action on their part. Purchases are settled through regular card acceptance agreements, he explained, and merchants have no idea when those purchases convert to installment solutions on the backend.

“I expect new entrants in this market will likely come from additional credit and debit issuers exploring ways to get consumers to install instead of revolve their purchases,” he said, predicting that issuers, rather than independent standalone solutions, will drive BNPL growth.

Non-exclusive

I asked Tullo why retailers aren’t doing more to leverage post-purchase options, considering the numerous advantages these offers provide. For example, don’t most standalone provider agreements have an exclusivity clause restricting merchants to one BNPL provider at checkout?

“Yes, that’s correct, but they can’t exclude American Express Plan It, Apple Pay Later, and other solutions built right into their current acceptance agreements,” he said. “With the exception of large enterprises that negotiate terms, retailers that contract with most BNPL providers are locked in to one.”

Fee-free

I also asked Tullo about pricing, having seen many BNPL promotions for free-to-customer plans. He assured me that most consumers are happy to pay a convenience fee to a trusted brand.

“Generally speaking, the market has grown out of this concept that it doesn’t cost you anything as a consumer to leverage this repayment option because the merchant is paying the cost,” he said. “A $3 fee is not a deal-breaker for someone splitting an $80 purchase into four $20 payments; consumers appreciate the convenience and flexibility and consider it a fair deal.”

De-risked

Tullo pointed out that post-purchase BNPL offers from card issuers to consumers are decoupled from the shopping experience. On the flip side, he said consumers tend to associate pre-purchase BNPL deals with specific retailers. For example, he noted that someone who gets a late fee, defaults, or is dissatisfied with pre-purchase BNPL is less likely to revisit that brand, which could become a bigger trend as the BNPL market evolves.

“A customer with a subpar experience with pre-purchase BNPL will tie it back to the website where the transaction occurred,” Tullo said. “This could lead to the customer looking for another merchant offering a different buy-now pay-later solution.”

Ripe for Promotion

Considering the numerous benefits of post-purchase BNPL, I questioned why more retailers aren’t aggressively promoting these services.

American Express presents Plan It as “easier to manage; no enrollment required; longstanding support; protection and customer service; no additional loan required; and no additional payments to keep track of.”

Chase describes My Chase Plan as a way to “pay off a purchase over time in fixed, equal monthly payments. There’s no interest for this purchase once it’s placed in a plan, just a fixed monthly fee.”

Citi summarizes Citi Flex Pay as a convenient way to “split up your eligible purchases and pay over time through simple monthly installments with a fixed APR.”

Perhaps retailers could display logos of American Express Plan It, My Chase Plan, and Citi Flex Pay on checkout screens, inviting customers to explore these options.

Around 2020, buy now, pay later (BNPL) solutions exploded in popularity, as an increasing number of shoppers across the globe turned to online shopping during a pandemic that caused a significant amount of financial uncertainty. 

However, since then, many BNPL firms and providers have crashed back down to reality; with the likes of Openpay, the Australia-based BNPL operator, halting operations for good and Klarna, the now self-proclaimed AI-powered payments network and shopping assistant (famous for its BNPL services), seeing an 85 per cent downturn in its valuation between June 2021 and July 2022.

Now, reports suggest that NatWest is planning to shut down its BNPL offering for good, less than two years after its launch. After suggestions that the decision was made due to less-than-expected adoption of the service, it appears that even the biggest UK banks are struggling to make headway in the space.

Upon the launch of the service, NatWest explained that it planned to disrupt BNPL in the UK “to make it better and safer”. However, much uncertainty continues to surround BNPL due to a lack of regulatory oversight. Although the Financial Conduct Authority (FCA) promised to introduce regulatory rules for the space last year, the plans appear to have been put on ice, causing concerns about the future of the short-term financing solution.

It might not just be uncertainty that is impacting BNPL’s success. Difficult macroeconomic and geopolitical conditions across the globe have impacted practically every financial sector there is. As interest rates rose to heights not seen for many years, it has become increasingly difficult for firms to ensure a profit year-on-year.

But what other factors could be forcing so many BNPL providers to close their doors, or take steps away from the space?

High-interest rates and fierce competition

As Alastair Douglas, CEO of TotallyMoney, the personal finance app, explains, macroeconomic conditions are still having an impact on the BNPL: “What drove the meteoric growth in BNPL services was the rapid rise in vendor integrations which not only benefited providers and shops by increasing basket values, but also offered customers an easy way of spreading the cost at check out.

“However, over the past two years, we’ve seen a global economic downturn, with high inflation not just eating away at people’s financial resilience, but also changing the lending landscape. Customers are now finding it more difficult to keep up with repayments, while high interest rates and rising defaults are challenging BNPL providers.

“For new-to-market BNPL firms, and banks offering these solutions, securing and maintaining vendor relationships is becoming increasingly challenging as competition is now far greater than it ever was, forcing some to pull products and out of markets altogether.

“Regulation of the sector would bring it in line with existing forms of credit, and improve transparency while offering greater customer protection. In turn, this could repair its tainted image, and unlock new opportunities and audiences who are otherwise reluctant to BNPL.”

Fintech pips banks to the post

In many cases, we often see how incumbent banks remain the most trusted organisations in the financial world. While banks are often ‘late to the party’ when it comes to financial innovation, they generally appear to maintain their customer base; even despite tough competition from countless fintechs and newer digital banks.

However, Frode Berg, managing director of EMEA at Provenir, the credit risk decisioning platform, suggests that the likes of Klarna have managed to dominate what is now a very overcrowded BNPL space: “BNPL financing is not slowing down any time soon, and recent research most certainly backs this fact. According to Polaris Market Research, the global BNPL market is projected to expand from $6.24billion in 2022 to $80.52billion by 2032.

“However, for several reasons, traditional banks are gradually stepping back from the BNPL space. The market has become oversaturated with BNPL providers and younger consumers gravitate towards BNPL services offered by popular providers like Klarna, bypassing traditional banks.

“Given the current economic climate, we’re also seeing that banks in the current lending landscape are increasingly refocusing on their core lending products, like credit cards, overdrafts, and loans, favouring more established and sustainable revenue streams. This shift aligns with the financial industry’s broader trend of prioritising profitability, sustainable growth and risk management amidst economic uncertainty.

“The challenges in achieving profitability within BNPL, including low utilisation rates and high operational costs, further deter banks.

“Regulatory uncertainty surrounding BNPL adds another layer of complexity. With the upcoming BNPL regulation being pushed back and Consumer Duty coming into force last year, banks are hesitant to invest further in BNPL offerings without stronger regulations and guidelines. This is resulting in banks recalibrating their strategies to prioritise stability and profitability.”

Is BNPL simply ‘a difficult product to maintain’?

Jakub Piotrowski, VP of product at Bud Financial, the AI-powered data intelligence platform, believes that one of the biggest factors limiting BNPL’s success is challenges regarding risk management: “The way financial institutions operate makes BNPL a difficult product to maintain.

“Aside from a competitive market creating pressure on terms and expensive customer acquisition, there is a major risk management challenge.

“Because BNPL is not always reported to credit reference agencies, it is increasingly difficult to get an accurate assessment of risk and affordability for the customer. This creates a vicious cycle where increased adoption of BNPL increases the risk. There are ways of managing this risk, mainly with the adoption of open banking, but that requires re-thinking the model.

“Also, major banks are still avoiding using open banking for credit-related analytics, especially for unsecured lending, which limits their ability to act. We end up with a situation where customers (often those who are vulnerable) are allowed to stack up BNPL debt without visibility for the lenders. Because this tends to concentrate on the most accessible lending, BNPL providers are the most exposed. It can be managed by augmenting slowly-changing credit files with up-to-date spending data and insights coming from open banking, something that Bud does for many lenders.”

Is BNPL bad for brand image?

While a lack of regulation contributes to wariness about BNPL for many financial firms and fintechs, other negative connotations about it, such as a widespread belief that some firms aren’t being completely transparent about late fees, could also be harming the space.

John Clark, product manager at card payment provider takepayments, suggests that this may well be the case. Clark explains: “As BNPL is essentially a loan, there’s a high risk that some customers may not be able, or remember, to pay the borrowed money back, leading to late fees laden with interest which may hurt their chances to borrow money in the future. Some firms might be wary that the negative connotations that have started to surround BNPL could impact their own brand image.”

He also reveals that, for retailers, the cost of implementing and maintaining BNPL as a payment option could end up being a costly decision: “While some providers, like PayPal, offer BNPL payments as part of their contract, businesses might find themselves needing to call on the help of a specialist third-party provider to take care of technical requirements, but it won’t come for free. Most providers charge an initial set-up fee and the process to find and negotiate a deal could require thorough research.”

How these factors will impact the buy now, pay later ecosystem is yet to be seen. However, signs suggest that the likes of Klarna may have done enough to see off the competition for the time being.

Buy now pay later (BNPL) offering easy account review, security and reasonableness of terms are among the top reasons for customer satisfaction finds J.D. Power ‘2024 U.S Satisfaction Study’.

BNPL has had a myth follow it since its inception that it is a gateway to debt. While there are examples of poor user mismanagement and unclear merchant fees which have led to debt, BNPL satisfaction rating has improved.

“The BNPL segment has grown quickly and many of the brands in the space are new,” said Miles Tullo, managing director of banking and payments at J.D. Power. “Consumers are generally most satisfied with the BNPL plans offered by their credit card issuers, but experiences vary quite a bit by brand and some of the newest providers are receiving the greatest increases in satisfaction scores.”

Key findings of the 2024 study

• BNPL customer satisfaction surges: Overall customer satisfaction with BNPL services rises 16 points year over year as consumers embrace the point-of-sale payment method. The increase in satisfaction is driven primarily by reasonableness of terms; ease of use when reviewing and managing account digitally; and security of account information.
• Financially healthy consumers most satisfied: BNPL customers classified as financially healthy represent 21 per cent of all BNPL users and have the highest overall satisfaction (731) with BNPL services. Consumers in the financially vulnerable category account for 32 per cent of BNPL usage and have a considerably lower overall satisfaction score (593).
• Room to improve on account management: The top three key performance indicators with most significant influence on customer satisfaction are ease of choosing repayment options; ease of managing payments; and ease of reviewing purchases and transactions. These indicators are met between 53 per cent and 62 per cent of the time, suggesting that many providers have room to improve on account management functions.
• BNPL brand reputations rise and loyalty starts to emerge: More consumers are saying that BNPL brands have a ‘good reputation’ vs a ‘bad reputation’, and 48% say they ‘definitely will’ reuse the same brand, up 4 percentage points from 2023.

Study ranking

Plan It by American Express ranks highest in BNPL satisfaction, with a score of 695. My Chase Plan (686) ranks second and Citi Flex Pay(676) ranks third.

The J.D. Power U.S. Buy Now Pay Later Satisfaction Study, now in its second year, is part of a group of four interconnected syndicated studies focused on the various forms of POS payment options. Its sister studies include the POS Choice Satisfaction Study; Debit Card Satisfaction Study; and Digital Wallet Satisfaction Study. The Buy Now Pay Later Satisfaction Study captured the responses of 4,135 customers, and was fielded from September through November 2023.

On this week’s episode of News & Views, The Fintech Times Podcast team speak about the hype regarding BNPL and whether it’s dying out, how high-interest rates and a challenging financial landscape are negatively impacting female-owned businesses in the UK and how G10 Bank works as a fintech, with Dock technology, to provide digital banking services to Brazilians in favelas.

Expanding upon their conversation from Episode 141, the Podcast Team continue to discuss buy now pay later (BNPL) – this time exploring the hype around the technology. The trio speak about what is more important: regulation or education in order to keep the BNPL hype alive.

The conversation then turns towards the low funding female founders are getting in the UK. Bignell, Bleach and Harrison exchange views on whether this is because of the current economic climate or because of something else entirely. They then try and work out if there is a viable solution to the problem.

Finally, Dock and G10 Bank’s collaboration to bring financial services to Brazilian favelas is discussed. Understanding the importance partnerships have on democratising finance, all three members of The Fintech Times Podcast team agree efforts like these reflect what fintech really stands for.

Listen to News & Views Podcast on your favourite platform:

    

Read the articles discussed in this episode:

Industry Voices That “BNPL Is Definitely Not a Dying Trend” as Hype Remains

High Interest Rates Negatively Impact 74% of Female Business Owners in the UK, Tide Reports

Dock Opens Digital Bank Branch to Democratise Access to Digital Banking in Favelas