The Buy Now Pay Later (BNPL) market is expected to surpass $1 trillion by 2030, according to GlobalData forecasts. New technologies have changed consumer behaviour and preferences, in particular, the rise in popularity of online and digital payments. BNPL involves a less rigorous application process and softer credit checks compared to credit cards, making it especially favourable to younger generations and those who have had credit difficulties in the past. The flexibility of tailor-made re-payment methods and ease of management make BNPL a more popular option for borrowing for an increasing number of consumers.

Covid-19 and the cost-of-living crisis spurs BNPL popularity

The growing demand for BNPL services followed the online shopping boom during lockdowns precipitated by the Covid19 pandemic, and is now being driven by the need for payment flexibility amid the current economic situation. BNPL has seen strong customer uptake and is being used by many to alleviate anxiety around personal finance and to help deal with the rising cost of living. With grocery and food prices now at an all-time high due to rising inflation, consumers are turning to BNPL for their weekly shops and even for trips to the local café. Spreading the cost of payments is becoming an increasingly attractive, or in some cases essential, option for consumers.

Greater transparency and more rigorous credit checks by 2030

Part of the reason that the BNPL sector has been able to grow rapidly is due to a lack of regulation. However, governing bodies are now reviewing the sector and considering imposing rules to protect consumers from accumulating unmanageable debt.

BNPL is already facing increasing regulatory scrutiny from the likes of the FCA. As a stronger framework is put in place, the reputation and trustworthiness of BNPL will improve. In the future, providers may need to charge interest and undertake affordability checks on customers.

Big Tech and payment providers are adopting BNPL

The demand for BNPL services from both merchants and customers has attracted the attention of Big Tech companies and leading payment providers. Apple’s Apple Pay Later has spearheaded the shift and is expected to be a leading player in the market by 2030, alongside the likes of Google, Mastercard, PayPal, and Visa. Big tech companies have both a broad reach and strong financial position, allowing them to seamlessly incorporate BNPL into their platforms. This, in turn, will force fintech’s with unsustainable revenue models or limited scale out of the market. Large payment providers such as Visa can ultimately use BNPL as an incentive to keep existing customers in their ecosystems.

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