Mark Beresford, Director at Edgar, Dunn & Company, discusses the ever-changing market of BNPL, one of the most popular alternative payment methods at the moment.
While the modern, tech-driven version of Buy Now, Pay Later (BNPL) has taken off in the last decade, the concept itself is not new. Department stores and consumer catalogue companies such as Sears and Roebuck started offering instalment plans, where customers could get the goods immediately but pay for them over time. Today, BNPL offers consumers and businesses flexible payment options, and it is anticipated to grow further. However, increased regulation, competition, and the need for responsible lending practices are shaping the future of the industry.
Despite some economic headwinds, the BNPL market is expected to continue its strong growth trajectory. This is fuelled by increasing ecommerce adoption around the world, consumer demand for flexible payment options, and the appeal of BNPL to younger demographics, such as millennials and Gen Z. As for the leading BNPL players, the list is long, with diverse players, from Affirm to Zip.
BNPL has reshaped how consumers shop, making high-ticket items more accessible to a larger customer segment. But without proper regulation and responsible use, it’s a slippery slope that could lead to mounting debt for consumers and financial instability for providers. So, is BNPL the perfect balance between convenience and caution, or are we plunging into another financial crisis?
BNPL is here to stay, and we have seen that it has been the fastest-growing alternative payment method in the last five years.
There are upsides of BNPL for both shoppers and merchants. The increased prominence of millennials in the digital economy and ecommerce growth during the pandemic have accelerated BNPL uptake. The main advantage for shoppers is the ability to take items home right away and pay later. The option to pay no interest – if payments are met on time or if the entire amount is paid off by the time the loan period ends – has unquestionably appealed to consumers wishing to spread their payments over a few months. BNPL is readily available in-store when it has been solely an online payment method. Consumers with low incomes or those who do not have a credit card will also find BNPL appealing.
It’s important to note that the regulatory landscape for BNPL is still evolving in many countries around the world. As the industry continues to grow and innovate, further regulations and guidance may be introduced to ensure consumer protection and promote a healthy credit market. Australia, for example, recently passed the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024. This legislation amends the National Consumer Credit Protection Act 2009 to bring BNPL products under the same regulatory framework as other credit products.
In the European Union (EU), the European Consumer Credit Directive (2023/2225/EU) is a significant step towards modernising and strengthening consumer protection in the credit market. It addresses the challenges posed by new credit products and digital finance while promoting responsible lending and borrowing practices. The Directive is likely to have a major impact on the way credit is offered and used in the EU.
The Consumer Financial Protection Bureau (CFPB) is the primary regulator overseeing BNPL in the US. The CFPB has issued guidance for BNPL providers, emphasising the need for clear disclosures, responsible lending, and fair debt collection practices. In addition to federal efforts, some US states are considering – or have implemented – their own regulations on BNPL, focusing on licencing requirements and consumer protection. For instance, California has been a frontrunner in BNPL regulation, already incorporating BNPL products under the California Financing Law (CFL). New York and Massachusetts are two other states where regulations vary, which can lead to confusion for consumers and create an uneven playing field for BNPL providers.
Regardless of the markets you operate in, BNPL providers are expected to incur greater compliance costs. These costs might be passed on to retailers through higher fees or changes in BNPL service agreements. There is an evolving regulatory landscape when it comes to BNPL, and the industry is relatively new, so regulations will continue to develop. By understanding the potential impacts, retailers can adjust their strategies and adapt to the changing BNPL landscape. Retailers must stay informed about any updates that might affect their operations and checkout sales conversion rates.
B2B BNPL is an exciting and growing area within the fintech space. It has the potential to transform how businesses manage their finances and make purchases, particularly for small-to-medium enterprises (SMEs). As the market matures and more providers enter the space, we expect to see further innovation and adoption of B2B BNPL solutions. B2B BNPL allows businesses to defer payments while suppliers get paid upfront. Buyers get instant access to goods and services without a large upfront cost. Suppliers receive full payment immediately, eliminating late payment risks. Flexible repayment terms (30, 60, 90+ days) keep cash flow healthy. There is no need for traditional bank loans, which often come with high interest rates and lengthy approval times. B2B BNPL is the next chapter of the BNPL growth story.
B2B BNPL is growing fast, particularly in the UK and in European markets. Some examples of B2B BNPL providers include Billie, Mondu, Hokodo, and Trevi. It’s worth noting that the B2B BNPL landscape is constantly evolving, with new players emerging and existing companies expanding their offerings. With ecommerce growth and businesses now expecting fast, seamless transactions, shifts are being driven by digital transformation, as more B2B purchases are happening online, requiring instant, flexible payment solutions. Moreover, SMEs struggle with cash flow and need better financing options.
Interestingly, a new breed of startups has redefined the concept of BNPL. An innovative payment method called ‘Save Now, Buy Later’ (SNBL) will incentivise consumers to save for big-ticket purchases while avoiding the debt trap that can come with BNPL.
SNBL is a payment option that involves setting aside money on a regular basis to build up savings, which can then be used to make a purchase later. This approach is based on the principle of delayed gratification, where an individual sacrifices immediate pleasure or convenience to achieve a larger goal or benefit in the future.
There are several examples of SNBL providers. Accrue is a US-based platform that helps users save for specific purchases and earn rewards. Hubble is an India-based platform that offers savings plans with partner brands and discounts on purchases. Monkee is another Indian provider that allows users to save and invest while earning rewards. In Germany, Savrr is a platform that integrates savings plans for specific purchases.
SNBL will promote responsible spending habits and empower consumers to achieve their financial goals. While still in its early stages, SNBL has the potential to play a niche, yet significant role in the future of consumer finance.
As BNPL is more mainstream, we expect stricter regulations in many jurisdictions. The BNPL market will likely become even more competitive, with both fintech companies and traditional financial institutions vying for market share. At EDC, we may see some consolidation in the industry, with smaller players being acquired by larger ones or merging to gain scale. We have already seen in the last five years that some Australian BNPL providers have launched in the UK and Europe, however, they have faced fierce competition or a slower-than-expected consumer adoption, forcing them to retreat.
The BNPL payment behaviour may be integrated into credit reporting systems, which could help consumers build credit history – but also impact their credit scores if they miss payments. Moreover, economic downturns or rising interest rates could affect consumer spending and their ability to repay BNPL loans. The future of BNPL is likely to be characterised by increased regulation, seamless integration, expansion into new sectors, such as B2B, and a focus on responsible lending. While challenges and uncertainties remain, BNPL will still play a significant role in the future of consumer finance and gain traction within the B2B segment.
This editorial piece was originally published in The Paypers` Buy Now, Pay Later Report 2025. The report provides thorough insights into one of the fastest-growing alternative payment methods, BNPL, and discusses the main trends and innovations across key markets worldwide.
Mark Beresford is a Director at Edgar, Dunn & Company and has over 25 years of strategic consulting experience in the payments sector. He is responsible for the company’s retailer and merchant payments practice, working with omnichannel merchants and payment service providers across the globe.
Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC’s expertise includes M&A due diligence, legal and regulatory support across the payment ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.
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