Summary
Despite the growing economic storm and voices warning against such a move, UK banks continue to rush into BNPL in defiance of rising default risk and increasing regulatory scrutiny. This is widely interpreted as a defensive attempt to win back younger users more comfortable with the likes of Klarna than with credit cards.
With BNPL rivals snapping up younger customers, NatWest, Virgin Money, HSBC and Monzo have all launched UK BNPL products over the past year. Fintechs like Klarna have benefited greatly from the boom in online shopping and BNPL demand sparked by the pandemic. Researchers at the universities of Chicago, Warwick and Nottingham estimated that the UK BNPL market grew to £5.7bn in 2021, more than twice the figure calculated by the FCA for 2020.
Monzo chief executive TS Anil described Flex, the BNPL service it launched in September, as ‘the right long-term play’ for the neobank, adding that ‘take-up was way ahead of what we were expecting.’
A number of bankers said they did not expect their products to generate significant revenues in the short-term, but that they would offer them access to younger customers, who now expect this service. One banker said his organisation had no expectation of making money on BNPL but had become concerned about the threat posed by fintechs branching into other services.
The banks have tried to position their products as a responsible alternative to BNPL incumbents, who are facing questions around the affordability of their loans. Traditional BNPL transactions have mainly relied on soft credit checks, which attempt to gauge creditworthiness but are not visible to other lenders and leave no permanent record. That has led to concerns that users can take on debt from a number of companies. In contrast, banks offering BNPL carry out a more complete and visible search of a consumer’s financial record.
Link: https://www.paymentscardsandmobile.com/uk-bnpl-market-continues-to-grow-as-banks-join-the-party/