“BNPL” companies have been all over the news lately, but what the hell are they?  BNPL stands for ‘buy now, pay later” and if this immediately gives you uncomfortable thoughts of predatory lease-to-own schemes, you’re not alone.

But this new wave of BNPL companies is different from the predatory lease-to-own style arrangements of the past where the renter ended up paying $500 for a toaster.

In fact, according to a recent article in Bloomberg, BNPL companies are increasingly popular with consumers:

• 39% of Americans say they've tried BNPL at least once, according to an early 2021 survey conducted by the Strawhecker Group.

And in a report from Morgan Stanley, the entrenched credit card giants view BNPL companies as “stealing market share from debit cards and cash payments.”  As if these giants haven’t. been doing the same for decades…but that is another story.

Executives from American Express Co., Capital One Financial Corp., Synchrony Financial and other firms mentioned BNPL products more than 60 times during investor presentations last week, per the report.

How does BNPL typically work?  Of course, BNPL terms vary, but generally operate along the following lines:

• You make a purchase at a participating retailer and opt for buy now, pay later at checkout.
• If approved (you're told in seconds), you make a small down payment, such as 25% of the overall purchase amount.
• You then pay off the remaining amount due in a series of interest-free installments.
• You can pay via a check or bank transfer; payments can also be deducted from your debit card, bank account, or credit card automatically.

{from Investopedia}

The reports’ analysts also wrote:  “If you listened to the conferences over the last week, you heard a lot of fireworks when the conversations turned to BNPL.  The calm webcasts belied the fighting words of the incumbents.”

Gen Z and millennials like BNPL.  They don’t like credit cards and prefer fast, cheap payments with no interest fees and nominal credit checks.

The big BNPL players

• Klarna ­–out of Sweden, it’s the gorilla with a $45.6 billion valuation and 90 million users
• Affirm Holdings ­– $29B market value after a tie up with Amazon, based in San Fran
• Afterpay – also out of SF, this one is being bought by Jack Dorsey’s Square for $29 billion
• Revolut, a $33 billion British fintech is trying to go after Klarna’s market share
• PayPal is buying Japanese BNPL provider Paidy for $2.7 billion to get into the game
• Apple is teaming up with Goldman Sachs to enter the space
• There is a lot of BNPL activity in India where most don’t have credit cards:
  • Amazon Pay, Flipkart and Paytm are being challenged by startups such as Simpl, LazyPay and ZestMoney.
  • ZestMoney actually just raised $50M from Zip, an Australian BNPL company.  Zest said it has over 11 million users and has 25 banking and non-banking financial partners and has a presence in over 75,000 physical stores and more than 10,000 online sites.  All figures in this section per an article in the Washington Post.

The market size.  Global sales using BNPL totaled $93B last year with the potential to top by $181 billion next year.  BNPL is estimated to account for 3% of e-commerce in the U.S.  (Figures courtesy of Bloomberg Intelligence)

It’s amusing to think that this phenomenon started way back in the 19th century when Singer Sewing Machines sold its products for a “dollar down, dollar a week” to people trying to start businesses.

Now the modern twist is ‘BNPL’ being used by Gen Z’ers and millennials to buy impulse sneaker buys and new iPads online.

Easy peasy to share this story with your peeps