At the outset of 2023, brands and finance companies are still seeing incredible enthusiasm among consumers for buy now, pay later (BNPL) services. With a recent report by Global Data projecting the BNPL sector will grow by 33.3% to a total value of $597 billion by 2026, startup fintechs and established retail brands alike are rushing to offer their own proprietary BNPL offerings to users.
According to an increasingly prominent group of voices across the industry, however, this level of growth may not be possible for long. There have been plenty of warning signs for the BNPL industry — among them are recent rumblings from the Consumer Financial Protection Bureau (CFPB) which point to an imminent raft of heightened regulations.
Most worrisome of all, however, is the continued lack of profitability of BNPL, with even the most successful companies such as Klarna and Affirm still not reaching profitability. Amid a marketplace crowded with more established brands, some experts predict we are rapidly approaching a massive consolidation in the BNPL world, even as the service continues to gain wider acceptance.
“I think there is a point where the investors are going to find it difficult for these companies to continue to lose hundreds of millions, if not billions, of dollars,” said Nandan Sheth, Chief Executive Officer of payment startup Splitit. “Having two, three, or four installment providers cluttering up the checkout line actually just confuses the consumer, and actually brings the consumer to a point where they have to make an extra decision.”