According to GlobalData, the buy now, pay later BNPL industry reached a new milestone with the amount spent on its services in 2021.
GlobalData said that the BNPL providers such as Klarna and Affirm reached a transaction value of $120 billion in 2021 and will likely hit $576 billion by 2026. In the year 2019 the global transaction value was only $33 billion.
The BNPL space has been hot for fintech players like Affirm and Klarna, with established companies like Mastercard MA and Visa V jumping into the foray. In August 2021, Afterpay was acquired by Block SQ.
Chris Dinga, a payments analyst at GlobalData, said BNPL is booming in popularity. There were increasing number of merchants accepting these solutions, which was a reason for this rapid growth. There are some big partnerships with e-commerce giants such as Amazon and Shopify, opening up a whole new world of consumers. Millennials and Gen Z are the core customers of BNPL, according to GlobalData. Millennials and Generation Z are attracted to the simplicity and speed of BNPL loans, as well as their interest-free nature, according to Dinga. Even though banks are trying to appeal to younger generations, their efforts are falling short. As part of a wider shift in the tech sector, there are some headwinds for BNPL players. Many of these companies are now announcing layoffs to deal with costs, as the market has taken a turn for the worse. Klarna has a 10% reduction in staff.
Former regulators have warned users about the potential pitfalls of using BNPL.
Many lack financial understanding and discipline to resist the relentless marketing of BNPL providers. My Klarna app sends me near-daily emails with pictures of smiling young consumers pushing their retailers latest deals. She can be reached at aarthiyahoofinance.com. Follow her on Twitter aarthiswami.