Hey Jason - great piece on breaking down the space. I feel like many of these companies are now just trying to jump on the bandwagon around BNPL/POS financing and they are no different than many payday lenders once you look at the terms around late fees and interest rates. Does not seem like there is substantial innovation in the space after the first few entrants (ie. Affirm) aimed to solve the problem around how traditional credit reporting works that leaves behind a large percentage of the population access to such financing options. Have you seen anything interesting on the BNPL model on the enterprise side targeting SMB businesses? There seems to be a big need in emerging industries where many of these companies are not bankable from a traditional bank's standpoint. Interested to hear your thoughts.
Jason can you explain in a bit more detail how the unit economics of Affirm work. Given the 0% fee it means the merchant fee should cover defaults as well. Seems quite low to do that given the soft underwriting policy you mentioned.
In the McKinsey chart you share, it appears there were $94B of outstanding POS lending balances in then US in 2018. Were all of these outstanding balances originated by the fintechs in the space?
Buy Now, Pay Later vs POS Lending, a Crash Course
Basically, this item is not 100% true: "BNPL services do not furnish data to credit bureaus (this debt is invisible to other creditors)"
https://www.refinery29.com/en-gb/2021/07/10580038/buy-now-pay-later-mortgage-eligibility
https://www.aviva.co.uk/aviva-edit/your-money-articles/how-buy-now-pay-later-affects-mortgage-applications/
https://www.thisismoney.co.uk/money/mortgageshome/article-9807015/Turned-mortgages-using-buy-pay-later-shopping-deals.html
Hi Jason, excellent article. Few questions...
1. Generally what is the method followed for collections/ recovery? any idea on avg. NPA's?
2. What are typical charges to merchant by the BNPL provider? understanding that to consumers it is more or less free....
3. Why do you think providers like Klarna or AfterPay are successful over any traditional Bank/ FII offering BNPL services?
Hey Jason - great piece on breaking down the space. I feel like many of these companies are now just trying to jump on the bandwagon around BNPL/POS financing and they are no different than many payday lenders once you look at the terms around late fees and interest rates. Does not seem like there is substantial innovation in the space after the first few entrants (ie. Affirm) aimed to solve the problem around how traditional credit reporting works that leaves behind a large percentage of the population access to such financing options. Have you seen anything interesting on the BNPL model on the enterprise side targeting SMB businesses? There seems to be a big need in emerging industries where many of these companies are not bankable from a traditional bank's standpoint. Interested to hear your thoughts.
great one. I am wondering, for BNPL / Pay in 4 models, who eats the credit loss and who eats the fraud loss? the BNPL provider or merchant?
Jason can you explain in a bit more detail how the unit economics of Affirm work. Given the 0% fee it means the merchant fee should cover defaults as well. Seems quite low to do that given the soft underwriting policy you mentioned.
In the McKinsey chart you share, it appears there were $94B of outstanding POS lending balances in then US in 2018. Were all of these outstanding balances originated by the fintechs in the space?
Thanks for writing this. Can you share more light into this please...
<snip>For merchants, there is declining marginal benefit for adding additional POS lending or BNPL partners</snip>