Buy Now, Pay Later: Point of Sale Installment Loans in the U.S. Market and International Perspectives, 2nd Edition
Consumer credit is a multi-trillion dollar industry in the U.S., with BNPL installment loan (also called point-of-sale or POS installment loan) volume subsumed under the financial results reporting category of "personal loans." This report slices out BNPL installment loans from their parent category, providing U.S. market size estimates for 2015 vs. 2020, as well as year-by-year projections through 2025. These projections were developed in the context of swift changes in consumer payment preferences during the pandemic, as well as macro-U.S. economic and consumer demographic trends. While focusing on the BNPL installment loan industry in the U.S., this report also covers the wider context on BNPL financing in Asian, European, and Latin American countries.
- Executive Summary
- Scope & Methodology
- Scope of Report
- Report Methodology
- BNPL Market Trends
- Surging Even Before COVID-19
- Longer Term Payment Trends Accelerated
- Credit Cards Affected by Pandemic Payment Changes
- Table Revolving Credit, Credit Outstanding, 2018-2021 (in $billions and % change)
- BNPL in the Payments Landscape
- BNPL Was Made for a Global Pandemic
- Credit Card Balances Fell with Shutdown … and Then Consumers Paid off Their Balances
- Debit Card Use Increased During the Pandemic
- Table Credit and Debit Card Purchase Volume for Mastercard, Visa and American Express, Quarterly, 2020 – 2021 (in $billions)
- Robust 15% CAGR Projected for BNPL 2020-2025
- Table U.S. BNPL Market: Estimated CAGR for 2015-2020 vs. 2020-2025 (percent)
- Table U.S. BNPL Market, 2020-2025, (in $billions and percent growth)
- Trends and Opportunities
- Banks
- Merchants
- Fintechs
- Robust and Frictionless Digital Strategy Is Essential
- Responsible Lending in Coronavirus-Altered Economy
- Diverse Strategies Based on Credit Segmentation
- Scope & Methodology
- Market Growth Opportunities
- Strategic Considerations for Market Participants
- Banks
- Merchants
- Fintechs
- Robust and Frictionless Digital Strategy Is Essential
- Consumers Research and Shop Via Mobile, Even if They Buy In-Store
- Table Mobile is the Lead Channel for E-commerce in the U.S., 2018-2021 (percent)
- Emphasis on Responsible Lending
- Diverse Strategies Based on Credit Segmentation
- Consumers Research and Shop Via Mobile, Even if They Buy In-Store
- Accelerating BNPL Growth
- The Morphing of Installment Loans
- Strategic Considerations for Market Participants
- U.S. Industry Context
- The Consumer Credit Market Before BNPL Installment Finance
- Finance Companies and Credit Card/Store Card Lines of Credit
- The Opportunity That Created BNPL Finance
- BNPL Loans Turned Small Dollar Consumer Finance on Its Head
- Consumers' Receptive to New Ways to Buying and Paying for Purchases
- The Backstory of BNPL
- E-Commerce Growth Fueled Merchant Need for Differentiation and Competitive Advantages
- BNPL Financing Upstreamed in E-Commerce to Larger Market
- The Consumer Credit Market Before BNPL Installment Finance
- BNPL Financing in the U.S.
- Forecasting Industry Growth
- 2021 a Year of Industry Acquisitions and Partnerships
- Robust 23.2% CAGR Projected for 2021-2025
- Table U.S. Point-of-Sales Installment Financing Market: Estimated CAGR for 2015-2020 vs. 2020-2025 (percent)
- Table U.S. BNPL Installment Financing Market, 2020-2025, CAGR (in $billions and percent growth)
- Summary of Rationale for Longer-Term 2020-2025 Projections
- Table E-commerce as a Percentage of Retail Sales, 2019-2021 (in $millions)
- Key Growth Drivers
- New Market Niches, New Player Strategies All Contribute to Growth
- Consumers Receptive to BNP: Loans
- Fintechs Leverage Consumer Payments to Build Customer Relationships
- New Strategies from Traditional Financial Institutions
- Key Competitive Challenges
- Challenges Dictated by Player's Role in Payment Transaction
- Payment Friction
- Regulatory Oversight: BNPL Providers' Business Models Invite Scrutiny
- Competition Pressures Prices
- Uses of BNPL Installment Move from Large Ticket to Smaller Ticket Items
- Consumers Avoid New Credit Card Accounts
- Forecasting Industry Growth
- The U.S. BNPL Customer
- Packaged Facts Survey Findings
- Overall Usage and Key Cohorts
- PayPal Credit Is Most Used BNPL Loan Provider
- Recentness and Frequency of BNPL Loan Usage
- BNPL Loans by Amount Borrowed
- Platforms for Use of BNPL Services
- Characteristics of BNPL Loan Usage
- Table Customer Service Patterns for BNPL, August-September 2021 (percent of BNPL customers)
- Table Customer Service Patterns for BNPL, August-September 2021 (percent of BNPL customers)
- Packaged Facts Survey Findings
- The U.S. BNPL Financing Merchant
- Significant Benefits to Merchants
- Consumers Demanding Product
- Airlines
- Fintechs
- Significant Benefits to Merchants
- U.S. Dynamics: Traditional Players
- U.S. Banks and Card Issuers Join BNPL Finance Market
- U.S. Banks
- Bank: Citizens Financial
- Consortium: GreenSky Financial
- Card Issuer: Citibank
- Bank: Goldman Sachs
- Card Issuer: JPMorgan Chase
- Finance Company: Synchrony Financial
- Card Networks Enter BNPL Finance Market
- Industry Context
- Visa
- American Express
- Mastercard
- U.S. Banks and Card Issuers Join BNPL Finance Market
- U.S. Dynamics: Fintechs
- International Fintechs Drive Innovation in U.S. BNPL Finance
- Fintechs Targeting Consumers With/Without Credit
- Table Fintech Volumes, Lead Products, and Repayment Methods (volumes in $billions)
- Fintechs Targeting Consumers With/Without Credit
- Klarna
- Largest BNPL Provider with Valuation of $45.6 Billion
- Klarna's Market Performance Has Investors Clamoring to Give it $Millions
- Klarna's U.S. Focus
- Klarna Vibe Loyalty Program
- Klarna Offers Consumers Three BNPL Financing Products
- Klarna Reports that its Product Boosts Average Order Value by 68%
- In-App Browser Lets Shoppers Use Klarna Anywhere on the Internet
- PayPal Credit
- Since 2008, PayPal Credit has Originated $50 Billion in BNPL Installment Loans
- Moving into New Regional Markets with BNPL Acquisitions
- Marketing to Both Merchants and PayPal Users
- PayPal Credit Introduces Pay in 4 to its Pay Later Roster
- Pay in 4 was PayPal's Response to Competitors and its Merchant Demands
- Affirm
- Since 2016, Affirm has processed $15.0 billion for Merchants
- Investor Pop Took January 2021 IPO to $23.2 Billion
- Table Affirm's Key Metrics, YOY, 2021
- Affirm Began as a Payment Option for Subprime Consumers
- Most Offers Are Through E-Commerce and an In-App Shopping Browser
- Walmart Offers Affirm BNPL Loans at its 4,000 U.S. Stores
- Amazon, Peloton and Affirm
- Affirm's AI Lets it Approve 126% More Borrowers than Synchrony
- Affirm at a Strategic Crossroads on Achieving Profitability
- Afterpay
- Afterpay Offers a Single, No-Interest Product
- Its "Mall" of Afterpay Stores Is Available Online or Through Its App
- Virtual Card Brings Afterpay into the Payments Options of Largest Retailers
- Afterpay Showing Solid Growth in U.K.
- Table Afterpay, Global Growth 2019-2021
- Acquisition by Square for $29 Billion
- Amazon
- Amazon's BNPL Options
- Loan Details
- Sezzle
- Sezzle Built Key Partnerships in 2020 and 2021
- Sezzle's Spiel: 4 Interest-free Payments Over 6 Weeks
- In 2 ¾ Years, Sezzle Grew from 1 Million Customers to 2.9 Million Customers
- Sezzle Enters Contract with Target and Introduces a Loyalty Program
- New BNPL Features
- BNPL Product Extension with Ally Financial for Purchases up to $40,000
- Surging Growth
- Sezzle's IPO Captures Aussie Investors' Enthusiasm for BNPL Finance
- International Fintechs Drive Innovation in U.S. BNPL Finance
- International Market Dynamics
- Global Snapshot
- Overview
- Latin America
- China
- Western Europe
- National Debt and Payment Preferences
- BNPL Is Growing Twice as Fast as Credit Cards
- BNPL Growth Is Fueled by Consumers' Desire for Payment Choices
- Having Payment Options Informs U.K. Consumers' Choice of Merchants
- Europeans Use Wide Range of E-Commerce Payment Options
- Finally, Germany Moving to Credit Cards and BNPL Finance
- Benefits from E-Commerce and Highly Developed BNPL Tech
- Brazil
- Largest Latin American Marketplace
- Robust Installment Loan Ecosystem
- Consumer Financial Services Growing
- More Internet and More Smartphones
- Previously, Consumers Left Stack of Postdated Checks as Installments
- Brazilian Retailers Advertised Installment Price, Not Full Retail Price
- Installments Used in 80% of Brazilian E-Commerce Purchases
- In Other Markets, Fintechs Collect Shopper Payments
- Biggest E-commerce Categories Are Electronics and Travel
- Daunting Import Tariffs Act to Depress E-Commerce Volumes
- Mexico
- Mexico's E-Commerce Value More than Doubled Between 2014 and 2019
- Debit Cards Are Not Authorized for Digital Commerce
- Country's Largest C-Store Lets Consumers Buy Online and Pay Cash In-Store
- Market Solution Still Needed for Paying in Cash Installment for E-Commerce
- China
- China's High Level of Mobile commerce
- Tighter Regulations Tamper Chinese BNPL
- China, and the Countries It Invests In, Are Most Advanced BNPL Finance Markets
- Tencent
- Alibaba
- Leveraging Chinese Tourists to Enter New Markets
- Trade Wars Are Thwarting Plans
- Global Snapshot
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