Buy Now, Pay Later (BNPL) is projected to be the world’s fastest-growing payment method in coming years as e-commerce payment preferences continue to shift away from cash and credit cards towards alternative payment options. According to GlobalData estimates, the BNPL market will reach $596.7 billion by 2026, up from $141.8 billion in 2021, growing at a compound annual growth rate (CAGR) of 33.3%. The prospect of this impressive growth has been underscored by the significant amounts of capital that have flowed into BNPL businesses: Klarna’s $639 million funding round in 2021 valued the company at $45.6 billion, and Square acquired Afterpay for $29 billion, as reported by a Bain and Company study.

Lucrative developments

BNPL can be considered an interest-free form of credit. The digital concept was originally pioneered by fintechs such as Klarna, Affirm, Afterpay, and Clearpay. BNPL services have become increasingly popular as many consumers lost purchasing power due to the pandemic. In the US alone, loans made by Affirm, Afterpay, Klarna, PayPal and Zip increased from $2bn in 2019 to more than $24bn in 2021, according to the Consumer Financial Protection Bureau. As business-to-consumer (B2C) demand for BNPL has surged, so has the interest in fintechs and banks in providing these services.

The BNPL market is now on the threshold of a number of new exciting developments. In 2023, the sector is expected to upgrade to facilitate business-to-business (B2B) payments with third-party credit and risk-management tools for improved cash-flow flexibility. This is a lucrative area with the total value of the B2B market in Western Europe alone estimated at over $12 trillion, whereas less than $700 billion (only 6%) of this is currently from digital payments, according to Payments Journal.

Consolidation is also anticipated in the BNPL sector with large banks looking to partner with smaller fintechs. This will help fintechs not only comply with increasing regulatory scrutiny, but can help them grow and scale on an international level. Overall, the larger banks are interested in exploring opportunities by facilitating not only short-term unsecured lending, but expanding to other forms of payment, such as credit cards. By providing an alternative and cheap method of credit, BNPL can bring clear benefits to populations as a whole.

Capable experience

HPS has been offering BNPL capabilities for over 15 years through its PowerCARD offering. Several of HPS’ customers have implemented BNPL capabilities through the option to attach loans to payment cards.

Thanks to HPS’ advanced API system, transactions can be instantly transformed from a transaction to an installment, even after payment has taken place. BNPL installments are also supported at the Point of Sale (POS) level, whereby the buyer agrees to pay monthly installments to their bank.

PowerCARD is HPS‘ comprehensive suite of solutions that covers the entire payment value chain by enabling innovative payments through its open platform that allows the processing of any transaction coming from any channel initiated by any means-of-payment.

To know more about HPS and PowerCARD capabilities, please contact sales@hps-worldwide.com.