British Fintechs: Reaching For Their Share Of The Booming Buy Now, Pay Later Market Pie

Monzo and Revolut, two of Britain’s best-known financial technology firms, are planning to enter the booming “buy now, pay later” industry.

Buy now, pay later, or BNPL, plans are an increasingly popular method of payment that lets users spread the cost of their purchases over a series of installments. The trend was pioneered by the likes of Swedish fintech Klarna and Australian firm Afterpay.

Now, two of the U.K.’s hottest fintech companies are trying to get in on the action. Monzo, which offers checking accounts through an app, is soon set to announce plans to launch its own version of BNPL.

The person, who preferred to remain anonymous as the information is not yet public, said the digital bank would introduce affordability checks on customers.

Meanwhile, Revolut CEO Nik Storonsky said the company was working on its own pay later product. Revolut, a digital banking and trading app, was recently valued at $33 billion following an $800 million funding round led by SoftBank and Tiger Global.

But Monzo, unlike Revolut, is a regulated bank in the U.K. While Revolut was granted a European banking license in Lithuania, it is currently seeking further licenses in Britain, the U.S., and Australia.

Still, Monzo is smaller in size than Revolut, with 5 million customers and a £1.25 billion ($1.7 billion) valuation. Revolut says it now has more than 15 million users. Starling, another popular digital bank in the U.K., has over 2 million customers and was last valued at £1.1 billion.

Regulators' role

While the BNPL industry is growing fast, its rapid rise hasn’t gone unnoticed by regulators. The British government has plans to introduce regulation for the sector. Proposals announced by the Treasury department earlier this year included the requirement that firms make affordability checks before lending to customers and the ability to escalate complaints to the U.K.’s financial ombudsman.

According to a review published by the Financial Conduct Authority in February, the U.K.’s BNPL market is worth £2.7 billion, with 5 million Brits using such products since the start of the coronavirus pandemic. More than one in 10 customers of a major bank using BNPL services were already in arrears, the review said.

“The FCA has already taken a significant step towards bringing BNPL into the fold, with the review they unveiled earlier this year — and they are certain to increase controls if only due to the growing popularity of BNPL in the market,” David Brear, CEO of London-based fintech consultancy.

“Unlike some of the other providers of BNPL in the U.K., Monzo is already a regulated entity under the FCA and wouldn’t do anything to risk their reputation with the regulator.”


Analyst View
The Buy Now, Pay Later marketing strategy afford consumers the opportunity to buy and assess what they are buying before making payments for it. It is a proposition that is driving massive traffic within the online business space. Hence it is a go-to strategy for many Fintech to drive critical mass and potential buyers towards their products and services.











SOURCE:CNBC