Are They Coming for BNPL?

The buy now, pay later craze, which took flight during the Covid pandemic, has turned into a $70-billion-plus segment of the payments industry. But that doesn’t mean the point-of-sale credit product hasn’t stirred controversy among acquiring-industry executives—mirroring, in fact, the diverging opinions held by business observers and regulators generally.

We witnessed that emerging clash of viewpoints in August at a payments conference that featured a panel discussion on the state of play in BNPL, which has become a mainstream offering at banks and fintechs alike. “It has solved a real pain point” for consumers, said Rob Seidman, head of product, BNPL/POS lending, at U.S. Bank’s Elavon processing unit. “It’s made [lending] insanely simple.”

But others aren’t so sure. BNPL’s rising debt burden is “not good for our country,” insisted Vlad Sadovskiy, chief executive of the merchant processor and banking-services provider Netevia Group LLC. Still, he conceded the technology behind BNPL, which enables on-the-spot installment credit for everything from socks to high-end merchandise, is “really, really cool.”

The comments came during the MPC23 conference in Atlanta.

BNPL’s potential has attracted a raft of emerging and established technology and payments companies, including such players as Affirm, Afterpay, and Sezzle. Some sources estimate total loan volume in the U.S. market will near $72 billion this year, up about 20% from 2022. The ease of taking out the short-term credit helped it grow in popularity in e-commerce but has fueled its popularity for in-store checkouts as well.

That’s what worries processing executives like Sadovskiy. “Consumer awareness [of BNPL] is probably at an all-time high,” he noted. “Consumers have tapped their Covid savings, which is not a good thing. Now, you’re paying for your groceries over time. What’s next?”

Seidman cautioned against moral judgements. “Debt as an instrument is not good or bad,” he said. “As soon as we start playing the moral-police card, that’s rough. I’m not sure BNPL is good or bad. There are bad practitioners.” Still, he conceded his favorable viewpoint has limits. “I’m not in favor of [BNPL for] grocery or pharmacy,” he said. “You will not see us doing that.”

Regulators have already taken aim at BNPL and its providers. A key regulator, the Consumer Financial Protection Bureau, in March released. a BNPL report, and its view wasn’t pretty. While the report noted that “many [buy now, pay later] borrowers who we observed used the product without any noticeable indications of financial stress, BNPL borrowers were, on average, much more likely to be highly indebted, revolve on their credit cards, have delinquencies in traditional credit products, and use high-interest financial services.”

Guess who’s likely to have the last word.

—John Stewart, Editor john@digitaltransactions.net