Are you building a BNPL [Later] or BNPN [Never] model?

The payments industry has undergone a radical transformation over the past few years, thanks to the introduction of digital wallets, peer-to-peer online payments, and of course, buy now pay later (BNPL) functionality. BNPL is rapidly revolutionising consumer behaviour, surveys have spotlighted that as many as 14% of online consumers have used BNPL, which translates into about 29 million individuals across the US. In 2020, year-on-year investment in European BNPL players grew 118%—while €930 million was raised in Q1 of 2021 alone. The BNPL model should be wildly lucrative, since companies can earn fees or interest on both sides of the transaction. But most BNPL providers have been sacrificing profitability despite the popularity and breakneck revenue growth. This is due to a rise in delinquencies and BNPL players unprepared to collect and recover these payments. The increase in losses continues as the race to the bottom continues, and the next Wonga - the lender that went bust after it was owed more than £400 million in short-term loans from over 200,000 customers - is waiting to happen. If consumers aren’t able to pay back what they owe, and BNPL becomes Buy Now Pay Never, financial institutions will have to carry the burden of increased debt. If they do not address this unwanted detour in the customer journey and do not proactively plan recovery processes they’ll lose precious time, energy, and investment trying to recoup what they’re owed—negatively impacting their own bottom line. So it’s time to answer this question: are you building a BNPL[Later] or BNPN [Never] model?