Fintech platforms are increasingly relying on Buy-Now-Pay-Later (BNPL) services to drive growth, as major players like PayPal and Block strive to solidify their market position amidst intense competition.
BNPL services, while facing controversy due to potential debt accumulation, have gained popularity among consumers seeking to finance their e-commerce purchases through convenient installment plans.
During their recent earnings calls, Block (owner of Afterpay) and PayPal both reported substantial growth in BNPL usage. Although PayPal’s margins were weaker than anticipated, and Block’s performance received criticism from one analyst, leaders at both companies view BNPL as a crucial factor in their future growth. This surge in BNPL activity is largely attributed to the addition of new merchants and the seamless integration of BNPL services into their broader e-commerce payment solutions. However, their dominance in the sector is not assured, as startups like Klarna and Affirm continue to compete for millions of customers, and Apple Pay introduced its own pay later service in March.
Yvan Gillard, svp of payment solutions and omnichannel at e-commerce platform Radial, pointed out that BNPL players are vying for the same retailers who are increasingly seeking to diversify their payment methods. Usually, merchants opt for one service and stick with it, leading to a competitive landscape with numerous players entering the BNPL space. Initially, pioneers like Klarna and Afterpay held sway, but now industry giants such as PayPal and Apple Pay have joined the fray.
Let’s delve into the latest earnings calls to understand the direction in which BNPL is heading:
Block’s Vision for BNPL Success with Cash App During Thursday’s earnings call, Block CEO Jack Dorsey announced that Afterpay’s gross merchandising value for the second quarter reached $6.4 billion, marking a 22% year-on-year increase. The company expects growth in July to be on a similar trajectory. Looking forward, Block intends to enhance the integration of Afterpay with Cash App Pay. This integration would enable customers to use their Cash App balance or linked debit card for making BNPL installments. Dorsey emphasized that offering Afterpay significantly bolsters their pursuit of new merchants to adopt Cash App Pay.
In conclusion, BNPL is gaining traction as fintech companies leverage its potential for growth. Despite challenges posed by intense competition and concerns about debt accumulation, major players like PayPal and Block are keen on capitalizing on the benefits of BNPL. As the industry continues to evolve, the competition for market share remains fierce, with various players, including established firms and startups, striving to capture the attention of both merchants and consumers.