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Future of Point-Of-Sales Lending: Fintechs Pounce while Banks Sit Out

  • PDF Icon

    Report

  • 17 Pages
  • March 2021
  • Region: Global
  • Arizent
  • ID: 5715061
The pandemic has accelerated many financial trends, particularly for point-of-sale (POS) lending, also known as buy now/pay later (BNPL), which has become a prominent and popular alternative to credit cards. The market for this product is dominated by fintechs, despite a desire among consumers to access credit from their primary financial institution.

Key findings include

  • BNPL solutions are popular for the financial flexibility they offer at time of purchase. They can fill the short-term credit gap for the less affluent and young, satiate the need to borrow without revolving credit card debt and help consumers match payments with their existing cash flow.
  • Merchants find the services attractive as they allow customers to make purchases that they normally would not have been able to.
  • The market is dominated by four companies, each with different business models - and PayPal alone controls almost half of it. That said, half of the customers surveyed had never used a BNPL product before.
  • The products are largely short-term in nature (less than six months) and are split between a deferred debit product (56%) and an installment loan (44%). Two thirds of all purchases were for less than $400, reflecting the need for low-dollar borrowing.
  • Many (62%) of the installment loans offered come with promotional interest rates and an ability to borrow beyond the introductory period. One in five (19%) borrowers do not pay off the loan during the promotional period, making them subject to high-interest “go to” rates and other penalties.
  • Gen Z consumers favor loans to fill a credit gap, while millennials and Gen X customers favor deferred debit programs, reflecting more of a need to align purchases with cash flow.
  • Customers with the most recent purchase experience are the market’s strongest proponents for repeat usage and would recommend their provider to others.
  • There was strong interest across all generations in a bank-offered BNPL service. Gen X consumers had the highest level of interest at 86%, followed by 78% of Boomers and 76% of millennials.
The market for BNPL products is continuing to expand through a combination of more consumers shopping online, where these products are most prevalent, and as BNPL providers move into the offline, in-store channel. While fintechs appear to dominate this market, three of the four leaders are publicly traded, with the fourth planning to go public as of this writing.

Table of Contents

  • Introduction
  • About this report
  • Consumers need and want credit alternatives
  • The market is led by nonbanks
  • First-time users are crucial
  • BNPL products are short-term
  • Newest customers want to be repeat customers
  • Shoppers want banks to offer BNPL
  • Conclusions