To help you understand what is going on in the Buy Now, Pay Later (BNPL) lending sector and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
The Buy Now, Pay Later lending industry is facing mounting headwinds. The tightening of financial conditions over the past two years has brought challenges for independent lenders offering the service. These companies have expanded rapidly in recent years, leaving them with low recurring revenue alongside sky-high costs for marketing and customer acquisition. While factors like high inflation make BNPL more attractive for cash-strapped shoppers, credit losses will likely rise for the lenders.
Financing is also becoming more difficult for the industry’s lenders to secure as they have relied on venture capital and equity financing to cover operating losses. High interest rates and slowing growth have made investors more risk-averse, a switch from the COVID era when BNPL loans surged in popularity amid low interest rates.
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Overall, 17% of folks with a credit file used BNPL to finance at least one purchase in 2021. BNPL borrowers also had significantly higher usage in several other loan products when compared to non-borrowers, including retail accounts (62% compared to 44%), personal loans (32% compared to 13%), and student loans (33% compared to 17%).
Regulatory scrutiny is increasing for BNPL providers. Regulators say that the growing use of these types of lending options poses several potential risks to borrowers, like inconsistent consumer protections and excessive debt accumulation.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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