Payments are arguably the face of fintech. When you think about financial technology, it is easy to think about solutions which are making payments faster, easier and more accessible.
While buy now, pay later (BNPL) has enjoyed significant growth in recent years, an air of uncertainty remains around the space – whether that be due to a degree of untrust (seen by some as a debt trap) or because of increased regulatory pressures being placed on the space.
With this in mind, it can be difficult to predict what kind of year BNPL is likely to have in 2024. To find out more, we reached out to some industry experts.
BNPL trajectory ‘still points upward’
Barbara Vega, payments strategist, sr advisory, at Jack Henry & Associates, predicts that BNPL will continue to grow, just more slowly than it has previously: “The hype around BNPL has certainly matured, moving from a flashy trend to a more established fixture in the financial landscape.
“As we look to 2024, the explosive growth may have steadied, but the trajectory still points upward. BNPL’s appeal, especially to younger consumers who favour its straightforward approach, ensures it remains a relevant player.
“This demographic’s preference for clear, manageable financial solutions positions BNPL as a modern alternative to traditional credit systems. As the e-commerce world continues to expand, BNPL’s integration into online shopping experiences promises to enhance its appeal, offering a convenient and flexible alternative to conventional payment methods. Simultaneously, the regulatory landscape is adapting to this new financial player. The future growth of BNPL will be influenced by how it navigates potential regulatory changes, ensuring consumer protection and fair practices.
“In essence, while the initial surge of enthusiasm for BNPL might have normalised, its role in 2024 is expected to be one of steady, responsible growth. It’s less about revolutionizing consumer finance and more about providing a viable, user-friendly alternative that complements existing systems. BNPL is set to remain an important part of the financial narrative, with a focus on sustainability and adaptation to evolving market conditions.”
Could 2024 be truly ‘transformative’ for BNPL?
For Mike Smith, director of Company Debt, 2024 could prove hugely significant for BNPL: “2024 will be a transformative year for BNPL. With greater regulatory clarity and increasing partnerships with traditional financial institutions, BNPL will likely see more mainstream adoption.
“Innovation in this sector may lead to more diversified offerings, such as BNPL for larger, more regulated purchases like automobiles or healthcare services. But the industry will also face challenges like increasing competition, the need for global standardisation, and navigating varied regulatory landscapes across different markets.”
The regulatory hurdle
However, not all industry players believe BNPL is set for another year of complete success. As AJ Davison, senior partner manager at Acquired.com, explains, increased regulation is one factor that could make growth more difficult: “It’s been a tough couple of years for the BNPL sector with rising interest rates, reduced market share, difficulty raising capital, and a huge reduction in company valuations.
“BNPL service providers are also likely to face increased regulation in the coming years, which may mean uncertainty for some businesses. However, the payment model itself has been around for many years and will be around for many more. We’ve already seen BNPL starting to rise in different sectors as opposed to traditional retail. For example, Klarna is now available for Airbnb customers (UK) and several B2B BNPL companies are also now entering the UK market.”
Increasing industry transparency
Samantha Fogerty, COO at Payl8r, suggests that regulation could help improve the industry, rather than hold it back – ensuring it becomes more ethical and transparent: “No doubt we will see BNPL continue its growth in terms of customer utilisation. It provides huge benefits of convenience and it is fast becoming a common way to shop and manage payments.
“We’re beginning to see BNPL enter into new markets, such as the business-to-business (B2B) sector. This is an exciting space that hasn’t seen a great deal of innovation and BNPL can serve to help businesses manage their cash flow effectively.
“On the regulatory front, movement is coming which has been in the works for some time. This could involve changes in advertising standards, how creditworthiness assessments are completed, and BNPL services required to report to credit rating agencies. I think that proportionate regulation will see an improvement in our industry, ensuring customers are educated on the risks that come from BNPL and protected from falling into unmanageable debt.
“However, if the onboarding process becomes more elaborate and costly for lenders due to regulations, it’s likely that these costs will trickle down to the merchants by virtue of higher subsidy costs. These shifts will have a significant impact on BNPL providers and how they run their business, but should ultimately still contribute to a more ethical and transparent industry.”
BNPL could ‘reshape credit as we know it’
Finally, Nicholas Holt, head of solutions and delivery at Marqeta, explains why he believes the future is bright for BNPL, with the potential to do more than just consolidate growth: “After a prominent year in 2023, it seems short-term credit lending options such as BNPL will continue to prevail in the fintech space.
“The consumer appetite for flexible and convenient credit in the face of the ongoing cost-of-living crisis was illustrated in our 2023 State of Credit Report which found that 38 per cent of UK consumers had used BNPL in the last 12 months. This cohort grew to 61 per cent amongst 26 to 34-year-olds, demonstrating that this option is growing increasingly popular with younger generations.
“In the coming years, I expect this trend to only strengthen and BNPL could be set to reshape credit as we know it, growing from a tool once used for one-off purchases into a day-to-day way of paying for a variety of goods and services. The data suggests that BNPL and other short-term credit options that can aid with budgeting, will be popular with future generations, as flexible lending loses its stigma.
“This flexible future can be seen in the fact that BNPL firm Klarna has hinted that it will soon debut its Initial Public Offering, and in the various partnerships between fintechs and banks that facilitate instalment lending. For instance, Marqeta recently partnered with Credi2 to allow banks to offer customers flexible payment options.”
