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<p><em>In this third post in a three-part series, Socure’s Buy Now, Pay Later (BNPL) industry experts explore the biggest challenges faced by the BNPL industry. In this post, Brigitte Engel, Senior Director of Product Marketing at Socure, writes about the ever-changing BNPL provider landscape and what it means for incumbents as big players enter the industry. For more in-depth insights into the challenges facing the BNPL market, read the first two blog posts in this series <a href="https://www.socure.com/blog/the-three-biggest-challenges-for-bnpl-business-growth-challenge-1" target="_blank" rel="noopener">here</a> and <a href="https://www.socure.com/blog/bnpl-challenge-2-capturing-todays-digital-savvy-consumers-without-inviting-fraudsters" target="_blank" rel="noopener">here</a></em></p>
<p>Blockbuster news has been bursting from the Buy Now, Pay Later (BNPL) space on a weekly basis this summer. These fast-growing alternative payment providers that have become popular with Gen Z, millennials, and other credit-invisible consumers are now gaining market share—and giants in the payments industry want to crash the party.</p>
<h2><strong>Big Names Making Big Strides into BNPL</strong></h2>
<p>First, Apple signaled its intent to partner with Goldman Sachs to <a href="https://www.reuters.com/technology/apple-goldman-sachs-planning-buy-now-pay-later-service-bloomberg-news-2021-07-13/">field a BNPL offering</a>, pushing its stock to a record high. This news immediately hit pure-play incumbents <a href="https://www.fool.com/investing/2021/07/13/why-affirm-holdings-stock-was-sinking-today/">Affirm</a> and <a href="https://www.reuters.com/technology/apple-goldman-sachs-planning-buy-now-pay-later-service-bloomberg-news-2021-07-13/">Afterpay</a>, with <a href="https://www.fool.com/investing/2021/07/13/why-affirm-holdings-stock-was-sinking-today/">both companies’ stock down by about 10%</a>. Then VISA announced a plan to deliver a BNPL offering for its credit card issuing customers. According to <a href="https://www.investors.com/news/technology/visa-stock-company-moves-into-buy-now-pay-later-as-others-compete-for-consumer-financing/">Investor’s Business Daily</a>, VISA is quietly piloting this service in the U.S., Canada, Russia, and Malaysia. Not to be left behind, PayPal Pay-in-4 upped the competitiveness of its BNPL offering, <a href="https://www.reuters.com/technology/paypal-scraps-late-fees-buy-now-pay-later-purchases-2021-08-18/">announcing</a> that in October it will no longer charge customers late fees for missed payments. Used by seven million consumers, PayPal’s BNPL offering has processed more than $3.5 billion in total payment volume since launching.</p>
<p>On the acquisition front, the mighty Jack Dorsey’s Square <a href="https://www.reuters.com/technology/square-buy-australias-afterpay-29-billion-2021-08-01/">announced</a> it snapped up A-List BNPL provider Afterpay in a deal worth $29 billion in stock. Australia-based Afterpay expanded into the U.S. in 2018, and now <a href="https://www.fool.com/investing/2021/08/03/square-buys-afterpay-what-investors-need-to-know/">generates</a> almost half of its revenue in the States. According to <a href="https://www.reuters.com/technology/square-buy-australias-afterpay-29-billion-2021-08-01/">Reuters</a>, “Shares in Square surged 11%, while those in peer Affirm Holdings Inc <a href="https://www.reuters.com/companies/AFRM.O">(AFRM.O)</a> rose as much as 17%.” Understandably, this acquisition caught the attention of Sebastian Siemiatkowski, the CEO of BNPL pure-play Klarna, who said that the fast momentum of today’s BNPL industry represents an ongoing &#8220;<a href="https://news.yahoo.com/klarna-square-afterpay-deal-bnpl-192754762.html">land grab</a>.&#8221; As all this news makes clear, it&#8217;s a land grab that both new and incumbent BNPLs are racing to win.</p>
<h2><strong>Why Now?</strong></h2>
<p>The world is undergoing a digital transformation, and the pandemic accelerated the pace. In particular, online retail got a massive boost as brick-and-mortar retailers had to shutter their stores and ecommerce became the only option for millions of shoppers. As purses and wallets were squeezed, shoppers began taking advantage of a friendly new credit option to make purchases that may have been outside of their budget: buy now, pay later.</p>
<p>BNPL providers welcome credit-invisible shoppers, such as Gen Z and millennials, with four-in-one payment plans, zero interest, and often no credit check. Brands like Klarna, Affirm, and Afterpay became household names overnight. In May 2021, CB Insights reported the global BNPL industry is expected to grow 10-15x its current volume by 2025, topping $1T in annual gross merchandise volume by some estimates. And brands like Apple, Visa, and Square are finally starting to take note.</p>
<h2><strong>Where Do Incumbent BNPLs Go From Here?</strong></h2>
<p>Giants in the payments industry have set their sights on the burgeoning BNPL space, and there’s no going back. The scrappy, BNPL fintech market has to prepare itself to square up (no pun intended) against the biggest names in the banking biz.</p>
<p>For established BNPLs, this is a golden opportunity to differentiate and gain a competitive edge over the new players just entering the game. As discussed in <a href="https://www.socure.com/blog/the-three-biggest-challenges-for-bnpl-business-growth-challenge-1">previous</a> <a href="https://www.socure.com/blog/bnpl-challenge-2-capturing-todays-digital-savvy-consumers-without-inviting-fraudsters">posts</a> in this series, delivering an excellent customer experience with minimal friction at onboarding is a key revenue driver for BNPL providers. This will continue to be true as the market grows and BNPL providers’ ability to scale is tested, both by internal stressors and new competition.</p>
<h2><strong>Socure is the Growth-Engine BNPL Fraud Solution</strong></h2>
<p>Now is the time to onboard a <a href="https://www.socure.com/industries/bnpl">BNPL identity verification solution</a> that will get you ahead of the competition. Trusted by more than 100 of the leading BNPLs, alternative payment providers, and fintechs, Socure stops fraud, increases approvals, and auto-accepts more shoppers into your ecosystem. <a href="https://www.socure.com/talk-to-an-expert">Schedule time with Socure’s BNPL experts</a> to see how we can help you get ahead of the growing competition by reducing losses and increasing acceptance rates.</p>


BNPL Challenge 3: The Old Guard Crashing a New Market

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