The buy now, pay later (BNPL) market, estimated to be worth $120 billion in 2021, has grown significantly over the last few years. But for most of its rise to virtual checkout prominence, BNPL largely targeted everyday consumer goods like clothes from Urban Outfitters or a Peloton. Now, the credit method is moving beyond its e-commerce roots.
In the past few months, large companies have joined the BNPL market, also hoping to quickly approve consumers for installment loans.
Established players like Mastercard and Visa have launched BNPL services through their respective credit cards; Mastercard also estimated that $7.2 trillion of transaction value will occur through BNPL by 2025. Stripe also recently partnered with BNPL heavyweight Affirm to offer payment plans to any business on its platform.
But as multiple large financial service companies look to integrate BNPL into everything, a new fleet of early-stage startups are looking to improve on the strategy and offer tailored versions of BNPL for specific industries ranging from healthcare and childcare to groceries to even charitable donations.
While these services could help consumers access pricey necessities — in the case of medical bills or childcare — is it really a good idea for consumers to start paying off even more in installments?
Kathleen Blum, a vice president of shopper insights at C+R Research, isn’t so sure. The strategy has been proven to persuade consumers to spend beyond their means and has already pushed some users into debt.
“A lot of the people using buy now, pay later, from a demographic standpoint, tend to be a little less financially secure,” Blum told TechCrunch. “There really isn’t a good credit check. Are they really aware? Do they understand the complications with some of that?”
This new fleet of startups, however, makes a compelling argument as to why they shouldn’t be thought of in the same way as the first wave of BNPL startups.