The past year was a year of risk, hell, and uncertainty. The markets evidenced an unprecedented earthquake. While many companies were forced to downsize by the situation, others grew like crazy. Among the lucky ones, you can find risk management tools and buy now pay later (BNPL) solutions.
In late 2020, BNPL market leaders multiplied their capitalisation, according to The Motley Fool. Afterpay saw 292.78% growth while achieving a $34.29 billion capitalisation, and Sezzle experienced 289.76% growth and a capitalisation of $657.34 million.
|ASX BNPL share||YTD share price gain (as of 17 Dec 2020)||Market capitalisation|
|Afterpay Ltd||292.78%||$34.29 billion|
|Sezzle Inc||289.76%||$657.34 million|
|Openpay Group Ltd||97.58%||$264.63 million|
|Splitit Ltd||85.07%||$553.44 million|
|Zip Co Ltd||59.04%||$2.92 billion|
|Zebit Inc||(1.9%)||$97.24 million|
|Laybuy Holdings Ltd||(35.37%)||$231.16 million|
|Humm Group Ltd||(35.65%)||$576.99 million|
Source: The Motley Fool
The growth of a BNPL solution often depends upon integrations with partners.
The right focus on road-mapping future integrations contributes to success. Market leaders often have integrations with e-commerce and payment processing partners to win the lion’s share of the market.
Some companies choose solutions that focus on a niche and form close partnerships within the niche, which allows them to dive deep into customers’ needs and keenly personalise their propositions. Moreover, they may create omnichannel partnerships while gathering goods and services provided by partners from one platform.
Uplift provides a vivid example of the omnichannel approach. Many airline customers shop for tickets before their travel date but don’t purchase them because of the high upfront cost, and the prices are then subject to change. This situation is equally frustrating for travel merchants and customers, which inspired Uplift to create a win-win solution. Uplift recently secured a new $68 million credit line as it looks for travel to pick back up in the new year.
Companies using the omnichannel approach also attract investors, which further streamlines their growth.
For example, Katapult, an omnichannel payment platform that provides alternative purchase solutions for retailers, partners with both online and brick-and-mortar retailers nationwide. It can provide purchasing power to the underserved subprime consumer market, which allows it to grow sales and attract an entirely new customer base. The platform integrates payment processors such as Chargeafter, Affirm, and Versatile Credit. Katapult has received total investments of $286 million from CURO Financial Technologies, MissionOG, Blumberg Capital, and Tribeca Venture Partners.
The travel-oriented BNPL service Affirm was listed on the New York Stock Exchange this January, jumping almost 100% to $100 per share from the initial public offering (IPO) price. In total, the company has a market capitalization of around $24 billion since the IPO. Affirm works with the likes of Expedia, Delta Vacations, Priceline, CheapOAir, Suiteness, and others by offering buyers the chance to secure tickets and accommodations, then spread their payments over a preset schedule.
Innovation in payments
These examples are only a small part of the growth that BNPL solutions demonstrated in 2020. Along with adding capitalization, companies made innovative moves to adapt to the pandemic. One of the most notable was Klarna launching a plastic card, which made it possible to reach a wider client audience and allowed merchants to gain more revenue during the quarantine. The move became a starting point for the card-launching boom, which means that more BNPL companies will soon enlarge their client bases.
It’s becoming increasingly common to pay bills, insurance premiums, and school and college payments using BNPL options. The setup is the same as when you buy goods and services online, but there is one difference – partner platforms process payments in this case. Combined with platforms like QuickBooks, FreshBooks, or BPAY, a BNPL solution may occupy a new sector of user needs and revolutionize how people pay their bills.
To better understand this type of growth, take a closer look at the Australian BNPL solution called Humm. Its mission is to revamp the way people buy with easy, digital, interest-free financing designed for shoppers, retailers, and SMEs. In July 2020, Humm announced a partnership with BPAY, which means its customers can now use Humm to pay their electricity bills, insurance premiums, school fees, and more in easy, interest-free bites.
In the US, there are also BNPL solutions that allow for paying bills – for example, partial.ly.
A wide range of factors contributed to the success of a BNPL sector. Among the factors were the push for digitisation of payments and in-store purchases, attractiveness for investors, great potential for partnerships, and not-yet-great competition between market players.
At this point in time, there is room for experiments in that niche, and many customer segments have been left unaddressed. For example, it’s possible to focus on millennials to engage them with a BNPL as a new payment instrument, like PAYL8R did; or to focus on older people who have never paid their bills online before; or to service young moms and dads with their own specific needs.
CEO at Insart