Buy Now Pay Later, top trends and players in North America

North America was not as quick to adapt BNPL as Europe was. However, it is a trend that has risen in popularity over the last few years going by the increased number of users these systems have had with over 50% of the USA population having used BNPL systems at least once.

Following an inquiry last year, the CFPB found that BNPL providers Affirm Holdings, Block's (SQ.N) Afterpay, Klarna, PayPal (PYPL.O) and Australia's Zip Co (ZIP.AX) originated a combined 180 million loans in 2021, totaling $24.2 billion, a more than 200% annual increase from 2019.?

BNPL statistics

Source: OBERLO

• According to the latest BNPL statistics, the number of shoppers in the US opting for this payment method hit 33.9% of the total number of internet users there (more than 88 million users), which means that more than one out of every three online shoppers use is a buy now, pay later user.
• On the other hand, Canadians are a bit more sceptical regarding these payment systems. According to a recent report from the Financial Consumer Agency of Canada, 34% of them are failiar with BNPL, while just 8% have made a BNPL transaction between September 2019 and March 2021.
• There was a 11,7% increase in the overall usage of BNPL in North America in 2022. While this growth does sound impressive, it is a slowdown from the 2020 and 2021 numbers, where the increase was over 50%. Just like in Europe, younger people are more likely to use a BNPL payment system than other generations.?

• Klarna also has a huge influence in the US, but PayPal Credit is far and away the most popular BNPL service. As of 2022, PayPal Credit had 34.6 million users in the US - over 4x more than second-placed Klarna (7.9 million). Affirm (5.6 million), AfterPay (5.6 million), and FuturePay (3 million) make up the rest of the top five US BNPL services. That means that 56,7% of the North American BNPL market is dominated by these companies.

What the future holds

????Most people (56%) now prefer BNPL to credit cards. That's compared to just 25% who prefer credit cards. The remaining 19% switch between the two depending on their needs. Out of the 56%, 38% of these consumers believe that BNPL payment systems will replace credit cards in the future.

????BNPL statistics also show that its adoption is set to continue increasing over the next few years. The number of north American BNPL users is predicted to climb to 94.4 million in 2024, before hitting 99.7 million in 2025 and 104.6 million online shoppers in 2026 accounting for over 38% of internet users in the world.

????The USA is projected to become the biggest BNPL market. In early January, the CEO and co-founder of Klarna, Sebastian Siemiatkowski, announced via Twitter that the USA became Klarna’s biggest market in terms of revenue, overcoming Germany and Sweden. Klarna now has 22,000 retailers, 32 million consumers, 30 million app downloads and eight million people using the Klarna app every month in the US, which accords for 20% of its active monthly users. Source: Altfi

BNPL consumer regulations

Source: Reuters

The U.S. Consumer Financial Protection Bureau (CFPB) plans to start regulating "buy-now, pay-later" (BNPL) companies due to worries their fast-growing financing products are harming consumers. Following an inquiry last year, the CFPB found that BNPL providers originated a combined 180 million loans in 2021, totalling $24.2 billion, a more than 200% annual increase from 2019. The CFPB said it was concerned their products could pose risks to consumers, highlighting a lack of standardized disclosures across the five companies surveyed and the potential for consumers to become overextended. What the CFPB will exactly do, however still remains to be seen, as no actions have been taken yet.

Conclusion

It's clear that BNPL is a one of the fastest-growing ecommerce trends at the moment as well as a space that many fintech companies are focused on. BNPL is an attractive payment system. Debts are interest-free as long as customers have the money when the bills are due. There are many advantages to this payment system, as there are drawbacks. As consumer shopping habits continue to evolve, it will be interesting to see how big of a disruptor Buy Now, Pay Later services become in 2023, especially with the biggest systems switching their focus to the north American market.