Buy Now, Pay Later (BNPL) services explode in popularity
Online shopping has been on a tear this year, and the “buy now, pay later” industry has been riding its coattails.
One of the leading players, Afterpay, processed $2.1 billion in global sales in 2020, up 112% from November 2019. Its U.S. sales were up 205% to $1 billion. Klarna counted its 11 millionth U.S. customer in mid-November, just three weeks after hitting 10 million. Another big player, Affirm, is preparing for an initial public offering that The Wall Street Journal says could value the company as high as $10 billion.
Bank of America believes the buy now, pay later industry will grow by another 10x-15x within the next five years, which at the high end of that range would equate to roughly $1 trillion in transactions.
The most common example involves paying off a purchase in four installments spread over six weeks with no interest. Sometimes you can get a lot more time with 0% APR, like Affirm’s 39-month 0% partnership with Peloton that allows some customers to pay as little as $49 per month for a bike worth nearly $2,000.
Conventional wisdom was that buy now, pay later was for young people without much money or much credit. This is still true to some extent — picture the Gen Zer without a credit card who wants to finance some new clothes, electronics, or furniture. But nowadays, most buy now, pay later users are the so-called HENRYs (high earners not rich yet).
Buy now, pay later has been around for a while — Klarna was founded in 2005, Affirm in 2012, and Afterpay in 2014. The concept caught fire in 2020. The pandemic spurred a massive rise in online shopping (some buy now, pay later services can also be used in person, but it tends to be a digital-first concept).
Large, established financial institutions have caught on, too. American Express launched Pay It Plan It in 2017 (card members can make flexible payments for purchases of $100 or more; the fixed plan fees are typically lower than their regular interest rates). Citi and Chase unveiled similar features last year.
And PayPal has a lot of skin in this game as well, dating back to its 2008 acquisition of Bill Me Later. PayPal currently offers two different buy now, pay later concepts (PayPal Credit, which centers around a six-month 0% deferred interest promotion and Pay in 4, which is another of the interest-free six-week installment plans).
There’s certainly a place for buy now, pay later in the payments ecosystem. But there’s always a risk of buying something now that you may not be able to fully afford. While you may feel better about paying it off in six weeks or six months, what if you can’t? Debt, late fees, and credit score damage could pile up.
Also, buy now, pay later plans don’t usually report positive payment information to the credit bureaus, and some customers have difficulty resolving disputes about returns, damaged merchandise, and other aspects of the transaction.
But, Yes, Buy Now, Pay Later is one of the big waves in the financial market nowadays.
AUC project will enter into a loan market.
When users build their credit through our Tier app, we will accumulate credit information based on it and provide each user with the right amount of loan opportunities by utilizing big data.
Our loan program could be a microloan or, Buy Now, Pay later.
