The idea of buying a product beyond your budget and that too without paying any money upfront sounds incredible, right? This is made possible by an innovative online payment option named Buy Now Pay Later (BNPL).
Customer gets the flexibility to choose suitable installment payment options, which will spread over a certain span of time. Absence of any interest cost and strict approval requirements makes BNPL a sought-after, convenient payment option.
BNPL Space Fast Catching Up
Notably, the United States has been a persistent laggard in adopting the BNPL payment solution due to prevalence of credit cards. However, the space is now slowly but steadily gathering
According to Worldpay’s 2020 Global Payments report,“buy now pay later is the fastest growing e-commerce payment method, globally. In North America, “buy now pay later” market share is expected to triple to 3% of the e-commerce payments market by 2023. In other regions, such as EMEA, “buy now pay later” already accounts for almost 6% of the e-commerce payment market and is projected to reach nearly 10% by 2023.
Growth Going to Stay
Mastercard Inc,'s ( MA Quick Quote MA - Free Report) research, nearly three-fourth of consumers interested in installments prefers adding the feature to their existing card. Also, three of four Americans who tried the installment plans for the first time during the pandemic intend to continue with the option even after the coronavirus dies down. This reflects customers’ growing desire for such solutions. Win-Win Bid for all Parties Involved
BNPL is a win-win proposition for all the parties involved in a transaction, such as the consumer, merchant as well as the issuing bank. The consumer gets the option to buy stuff that was his layaway target. The merchant gains from more customers and better conversion, higher order value, rise in the repeat purchase rate and more benefits. Lastly, the issuing bank profits from elevated spending.
Stocks to Benefit From the Rapidly-Growing BNPL Marketplace
Other than major players
Affirm Holdings, Inc. ( AFRM Quick Quote AFRM - Free Report) , Klarna, and Afterpay, there have been others that have been watching this sector from the sidelines.
Below-mentioned companies making a foray into the BNPL space will bring more synergies to their existing lines of business.
Each of these companies already boasts a big customer base comprising millions of merchants and customer accounts. If the BNPL services are used by this huge number merchants and customers, the companies can then generate a new revenue stream by upselling to their customers. All stocks below carry a Zacks Rank#3 (Hold) at present.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Mastercard Inc. tied up with Total System Services last year to help issuers and merchants in North America provide flexible payment options to its cardholders. In 2019, the company acquired Vyze, which is a digital commerce and payments matchmaker. It collaborates with lenders and merchants, enabling them to offer installment loans to consumers who are buying those merchants’ products.
Mastercard also provides a comprehensive suite of BNPL offerings, which includes Pre-sale, Point of Sale and Post-Sale. Customers can access these varied options to decide how they can manage their finances and expenses. The company forged alliances with QuadPay, Fly Now Pay Later, Jifiti, Splitit, Divido and Pine Labs to provide BNPL services worldwide.
Visa Inc. ( V Quick Quote V - Free Report) , is looking to tie up with banks and merchant clients to pilot an installment payment solution starting January 2022. Last year the company tied up with Splitit Payments, a buy, now pay later (BNPL) technology firm. It also rolled out Visa Installments, a point of-sale credit solution to provide BNPL.
PayPal Holdings, Inc. ( PYPL Quick Quote PYPL - Free Report) started to tap the BNPL market by offering solutions last year. Its wide network of 29 million merchants can provide it with a ready base to kick off its BNPL solutions. The company’s management believes that adoption of the BNPL service by its merchants can improve conversion rates and boost ticket sales. This combination will drive the total payment volume for PayPal. Bottomline
The BNPL space remains largely untapped and thus offers enough scope for growth for the right players. However, the BNPL practice came under a regulatory scrutiny in the U.K. Regulators want more transparency of information to protect customers from risks associated with late payment or nonpayment. The regulation may also call for customers’ affordability check and give them recourse to law. In a way, these regulations will help construct a conducive environment for growth for the industry.
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