BNPL – USA Growth Slows
Key download stats show US growth slows in December while cards roar ahead
Afterpay US only recorded 10% growth in downloads in December 2021!
Klarna the market leader in pure BNPL (PayPal leads the category) grew by 70%, while Affirm grew by 90%.
However more troubling is all BNPL apps growth slowed significantly in 2021 vs 2020.
Annual BNPL sales for 2021 in USA is estimated to be under US$100 billion ?– company reports of major players show sales at only US$68 billion or US$5.6 billion a month. This is from Fintechs who are unregulated and live behind the growth at all cost model while making no profits.
?USA Credit Card Spend
?Wasn't BNPL going to kill off debit and credit cards??
?Consumer credit increased by US$40?Billion in November 2021
According to Feds November consumer credit data consumer credit increased at a seasonally adjusted annual rate of 11% to US$4.41?Trillion?(annualized US$52.9 Trillion).
Revolving credit (credit cards) increased at an annual rate of 23.4% to $1.04 Trillion (annualized $12.48 Trillion).
Non-revolving credit increased at an annual rate of 7.2% to $3.37 Trillion (annualized $40.42).
?A more detailed review in Jason Mikula’s Fintech Business Weekly pce below.
Scale in Critical and BNPL doesn’t Cut It!
While BNPL makes plenty of noise with spin and PR - as these US figures show it has no scale.
?BNPL 2021 US sales US$68 billion vs credit cards only US$12.48 Trillion says it all.
In percent against total retail payments BNPL is not even one basis point – remember this version of BNPL started with Affirm in 2012, Klarna, Afterpay, Zip and 28 others have been around since 2018. ( BNPL has been in the US for 250 years)
Scale is critical to be successful in payments as is wide usage points or ubiquity – BNPL has neither!
This chart from Pymnts magazine research shows the tiny scale of BNPL
The other issue not covered by any in the media is the very high overlap in BNPL usage – this is a major concern as it shows very little brand loyalty. Consumers have multitude BNPL apps and swap them around as this chart shows -
Scale is critical if you want long term survival - BNPL is not achieving scale - just look at PayPal vs Afterpay at the same point after launch - who will win this race?
Rivals overtake Afterpay in race for US customers
THE AUSTRALIAN Valerina Changarathil 12th January 2022
Afterpay – the buy now pay later groups soon to be acquired by American giant Block (Square) – is falling behind key rivals Klarna and Affirm in the race for new customers in the US, according to equities analysts at Morgan Stanley.
The investment bank was financial adviser to Block, previously known as Square during the acquisition of Afterpay.
Moran Stanley analyst Andrei Stadnik said Afterpay’s downloads in the US had maintained record levels in December 2021, “but its growth slowed to 10 per cent (year on year) from 130 per cent (year on year in December 2020”.
“Meanwhile, BNPL peer Affirm recorded 90 per cent down load growth year on year surpassing Afterpay”. Affirm had only recorded a 35 per cent growth in the prior period the data shows.
Meanwhile app downloads for Klarna, another major competitor, rose 70 percent although this was lower than the 120 per cent recorded in December 2020.
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Revolving Credit Increased at 23.4% Annualized Rate in November
FINTECH BUSINESS WEEKLY
Credit cards are back, baby!
According to the Federal Reserve’s consumer credit data series, revolving credit grew at a 23.4% annualized rate in November — 3x the rate of increase in October:
Data:?Federal Reserve
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Totally consumer revolving credit in November exceed $1 trillion for the first time since 2019, with overall consumer credit hitting $4.4 trillion?(not seasonally adjusted).
Multiple factors are driving the resurgence of consumer credit card borrowing.
November is traditionally a big shopping month, leading in to the holiday season. And that was even more true in 2021, as consumers did holiday shopping earlier than normal, owing to ongoing supply chain disruptions, shortages, and shipping delays.
But, perhaps more important in driving the increase, is that the cash cushion many households built during the earlier months of the pandemic has steadily faded — even with most families receiving monthly child tax credit payments, which Congress has so far failed to renew for 2022:
Image:?NYTimes
Research from the Bureau of Economic Analysis finds that excess savings accrued during the pandemic were mostly exhausted by the end of 2021. The personal savings rate, which spiked as high as 1/3 of disposable income at the beginning of the pandemic, has dropped to just 6.9% — lower than it was before the pandemic.
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Director at Iris Marketing Team
2 年I explored these products for research and found Klarna did little to make me a customer, while Affirm delivered more. For example, a simple $300 purchase was at 0% on Klarna for six weeks or 12 weeks on Affirm. I chose affirm and was contacted about buying through their portal for a purchase I was likely to make. I was incentivized, so I did. I was incentivized to start a savings account with Affirm, so I did. Klarna gives no real incentive to purchase for those that have the means to pay in cash upfront, while affirm does, that gives them an advantage as they hold on to cash in my savings account, and I actively look to use its portal for ongoing shopping. I attempted to use AfterPay at a retailer and not only was it too difficult to use to complete the transaction, but the retailer commented that others had trouble and most gave up. However, I dispute a few of the metrics used in this analysis. Downloads don’t really matter (I still have all three on my phone set up and ready to use) nor do registered accounts. What really matters is transactions and engagement. So long as Klarna maintains their method, I see no reason to use them (same with AfterPay) but I won’t delete them or close my account either.
Top Global Fintech & Tech Influencer ? Trusted by Finserv & Tech Global ? Content & Influencer Services ? Advisory for Digital Transformation ? Speaking ? [email protected]
2 年Great piece Grant. I especially appreciate the stats showing the % using several BNPL apps. SCary.
Helping you make sense of going Cashless | Best-selling author of "Cashless" and "Innovation Lab Excellence" | Consultant | Speaker | Top media source on China's CBDC, the digital yuan | China AI and tech
2 年Nice read Grant and a great way to start the year. Is the BNPL party over yet?
CEO Financial Services
2 年Anyone interested in US history of BNPL read this pce. Clearly BNPL is not new its only a new slice a very old consumer lending product https://www.dhirubhai.net/pulse/bnpl-200-year-old-innovation-grant-halverson/