Intense BNPL competition in the US boosts sectors’ expansion

By Puja Sharma

According to a survey, BNPL payment in the United States is expected to grow by 66.5% on annual basis to reach $82086.8m in 2022. In the United States, the BNPL industry continues to grow on a long-term basis. From 2022-to-2028, BNPL payment adoption is forecast to grow at a CAGR of 32.5%. Globally, Gross Merchandise Value in 2021 will be $49296.9m, while it will be $443781.4m by 2028 for BNPL.

The popularity of Buy Now, Pay Later (BNPL) products in the United States has surged dramatically over the last four to eight quarters. BNPL products such as those offered by Klarna, Afterpay, Affirm, and PayPal in the country have been adopted widely due to the global pandemic and the need to split the cost of purchases over time. Moreover, online shopping boomed during the global pandemic, driving growth in volumes for these providers.

As the competition continues to intensify in the United States BNPL market, providers are innovating with their product offerings to offer more flexibility and gain increasing traction from consumers.

In November 2021, Afterpay, one of the leading BNPL platforms, announced that the firm would introduce instalment payment options for subscriptions in the United States. The company stated that users could use BNPL on entertainment subscriptions, gym memberships, and online services. The firm is expected to roll out the service in early 2022, starting first in the United States and Australia.

Some of the initial merchants that are expected to offer the service include IPSY, BoxyCharm, Savage X Fenty, and Fabletics, among others. Apart from paying for subscriptions, the firm is enabling its offering to be used for preordered items, where the consumer can pay in four instalments once the product is shipped. As of November 2021, Afterpay has partnered with 100,000 retailers and has nearly 10.5 million active users on its platform in the North American region, which also happens to be the largest region in terms of underlying sales.

Partnerships with retailers

To increase the total volume and transaction value of BNPL purchases, firms are entering into strategic partnerships with more retailers. These strategic partnerships are also allowing consumers to use the payment method at more online and offline stores in the country.

In December 2021, Afterpay entered into a strategic partnership with Belk, the Southeastern regional departmental store. Under the collaboration, Belk will allow both online and in-store shoppers the ability to pay for their purchases using the Afterpay BNPL payment method. Since its alliance with Afterpay, Belk has also reported an increase of 50% in average order values for consumers using the payment method.

Similarly, in August 2021, Affirm entered into a strategic alliance with Amazon in the United States to provide online shoppers with the ability to complete their purchases of $50 or above using the BNPL payment method. Notably, the alliance with Affirm is the first strategic partnership for Amazon in the United States.

As the segment continues to record robust growth, the publisher expects more strategic alliances between retailers and BNPL platforms over the next four to eight quarters in the country.

Global expansions

In the United States, several players are competing for market share. As a result, BNPL firms are entering into mergers and acquisition deals to drive further growth and tap into other emerging markets globally.

In September 2021, PayPal announced the acquisition of Japan-based leading BNPL platform Paidy. The $2.7b acquisition will help PayPal to expand its capabilities, distribution, and relevance in the fastest-growing e-commerce market globally. Apart from Japan, the BNPL offering from PayPal is also available in markets such as Australia, the United Kingdom, and other European markets.

Apart from expanding global footprint, mergers and acquisition deals are also growing, as well-established businesses are looking to tap into the BNPL market.

In August 2021, Square announced the acquisition of Afterpay to enter into one of the fastest-growing consumer payments markets. Notably, Square acquired Afterpay for a total of $29b. This acquisition is expected to help Square in accelerating its growth in the United States as well as keeping up with PayPal, which has become a major player in the global BNPL segment.