ICYMI – New Study Finds More Than 70% Of BNPL Users Prefer Banks Over Fintechs

 

A new study from PYMTS and Amount, a leading financial technology provider, found an overwhelming majority of buy now, pay later (BNPL) users would prefer using a version of the service through their bank, rather than through a fintech provider. The study, based on a survey of more than 2000 U.S. consumers, also concluded banks have a unique opportunity to increase their market share in the fast-growing BNPL market.

Key Findings

• More than 70% of current-user respondents said they would be “More interested” in using bank-backed BNPL products compared to offerings supported by fintechs, while nearly 43% of all consumers expressed similar receptiveness to using a bank-backed BNPL product.

• Although Afterpay, PayPal, and Klarna currently control the top three market shares of all providers in the BNPL marketplace, roughly 80% of their current users indicated preference for a BNPL product issued through their bank.

• A majority of respondents ranked trust as their top factor in choosing a BNPL provider with the study concluding this sentiment favors banks over fintechs due to the longstanding relationships banks develop with their customers.

• 60% of millennials, 57% of bridge millennials and 54% of Generation Z consumers say they are interested in using bank-issued BNPL plans.

To read “Banking On Buy Now, Pay Later: Installment Payments And FIs' Untapped Opportunity” in its entirety, click HERE.

Momentum is Building for a Level Regulatory Playing Field

A growing share of banking activity today is occurring outside the purview of leading regulators. Driven primarily by “big-tech” and fintechs, these firms increasingly are offering financial products and services but do not abide by the same federal oversight requirements as America’s leading banks. With the BNPL market largely controlled by under-regulated fintechs and expected to reach 76.6 million users by 2025, users of these providers are at heighted risk of fraud and abuse.

As Mike Calhoun, President of the Center For Responsible Lending (CRL) recently explained in an American Banker op-ed entitled, Regulate buy now/pay later:

“BNPL products do not offer the standard consumer protections required of credit card providers or other regulated lenders, and their opacity regarding fees and repayment terms could easily place unwitting consumers into harmful, unaffordable debt. Regulators should ensure that BNPL lenders make loans only after determining the borrower’s ability to repay.”

Calhoun added:

“Unaffordable credit may provide a quick inflow of cash, but over the longer term — which, in the case of BNPL, can be just a few weeks or months down the road — unregulated fintech products can add to the debt burden of consumers already overextended by debt […] the time for regulators to rein in BNPL is now.”

These concerns, coupled with the CFPB’s recent inquiry into the business practices of five leading fintech providers make it clear – momentum is building for policymakers to institute a level regulatory playing field and ensure all consumers are protected in the BNPL marketplace, whether they choose a fintech or bank to meet their financial needs.

Background

To read CBA’s January op-ed appearing in American Banker, Consumer protections should apply to buy now/pay later firms, too, click HERE

To learn more about the rapid growth of BNPL and the threat posed to consumers from under-regulated fintech providers, click HERE.

To read CBA’s statement responding to the CFPB’s December inquiry into the business practices of BNPL fintech providers Affirm, Afterpay, Klarna, PayPal, and Zip, click HERE.