Five tips for startups exploring buy now, pay later

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Inside the past, present, and future of Buy Now, Pay Later.

At PwC Canada, we recently published our latest FinTech market map covering the ecosystem of disruptors that have raised venture funding over the past five years. In our analysis, we saw the maturity of the overall ecosystem, the emergence of new sub-segments into the mainstream (e.g., blockchain & crypto), along with some interesting merger and acquisition activity (some of which went to companies that were displayed in our 2019 market map).

One trend that has emerged has been the concept of Buy Now, Pay Later (BNPL). In Canada alone, transaction volume through BNPL methods is expected to reach approximately $4 billion USD in 2021. Globally, the BNPL industry is expected to grow 10–15x by 2025, according to analysts from Bank of America, transacting potentially over one trillion dollars in annual gross merchandise volume (GMV).

We’ve been asked by various clients our thoughts on the underlying concepts behind BNPL and to answer the simple question of “why should I care?”

Spurred by the IPO of Affirm in January of last year, the BNPL market has been blazing hot, with notable acquisitions along with startup raises. Investor confidence in the valuation potential increased following Square’s acquisition of AfterPay in August 2021, valuing the Australian BNPL company at a 23 times enterprise value to forward sales multiple, and setting off various records in the Australian market. PayPal followed shortly after in September, acquiring Paidy for $2.7 billion USD. Speaking of Australia, Zip had acquired US-based Quadpay to expand its BNPL offering globally, and then merged the two brands last year.

BNPL startups have benefited from the increased attention, already raising over $2 billion in equity funding at the halfway point of 2021, with more recent funding announcements, particularly in Asia and Africa, over the recent months. It’s no surprise, as 2021 was also the year of several large retailer partnerships with several BNPL startups. A quick search of earning reports (see below) tells the story.

Why BNPL? Why now?

At its core, the idea behind BNPL isn’t anything new. Furniture stores have had low or no-cost monthly payment plans for decades! What has changed is a fundamental shift in society and consumer behaviour—factors that are not necessarily net-new, but have only really begun to take off over the recent five years.

  • Our on-demand and subscription based mindset.The rise of on-demand services have led to us expecting products and services faster than ever before. Consumers expect things immediately and any wait time is an annoyance. Experiences have been designed to satisfy this craving. Often paired with a monthly subscription, retailers and service providers offer an optimal price point for a recurring subscription (leading to a much higher ROI in the long run).
  • Digital adoption. The pandemic has accelerated digital usage and encouraged mobile consumer behaviour.
  • eCommerce growth. Transactions continue to move virtually, and BNPL will disrupt the $8 trillion USD payment card industry and scale with e-commerce growth. In a recent Mastercard study of the latest holiday shopping season , e-commerce made up 20.9 percent of total retail sales, up from 20.6 percent in 2020 and 14.6 percent in 2019.
  • Payment flexibility. Ability to break down the cost into affordable and manageable payments has provided new options for consumers to manage their finances. Consumers, especially younger generations, have oriented their purchases.
  • Economic demand. The global wealth divide has never been greater. There is a distinct erosion of the middle class and the society has become more asymmetrical. Many people have written about this, including my colleague Blair Sheppard (PwC’s global strategy and leadership leader), captured elegantly in the ADAPT framework. BNPL enables those who cannot make a full payment to obtain a product or service—a very powerful concept.

Naturally, payment plans can be negative if the individual doesn’t have their personal finances straight(there are concerns from a societal standpoint, and at PwC Canada, we often work with our clients to address these risks – ensuring products and services are offered to benefit society, a.k.a “Tech for Good”).

However, if used correctly, the concept of BNPL can be a powerful economic driver, enabling access to critical tools for work and/or personal growth (e.g. laptops, trade tools, upskilling courses).

The Future for BNPL

As retailers, financial institutions, and startups race to fight for consumer wallet share in their own respective ways, it is without question that the availability of BNPL plans will continue to rise. More importantly, the customer experience comes into play now more than ever. Consumers will treat BNPL offerings similarly to any product they use: user interfaces that are easy to grasp, workflows that are integrated and seamless will win the “buy-in” of the consumer.

I envision scenarios where “Anything as a Service” (XaaS) models will prevail. BNPL is an enabler of access to these new business models and will become more mainstream for a variety of commerce options (not simply e-commerce). In the current state, BNPL players are focused on availability without restrictions. Innovation will also likely occur along the financing aspect that will allow for greater risk management (e.g. specialized rates / payment plans depending on collateral, loyalty, etc).

BNPL companies will not only continue to drive increases in gross merchandise value (GMV), but become key data holders of consumer behaviour and checkout preferences. A powerful dataset which will enable BNPL companies to be a collaborator in the design and optimization of their client’s end-to-end retail experiences.

So, what should companies looking to embrace BNPL do?

  1. Evaluate whether your payment experience is future proof.
  2. “Checkout” isn’t simply accepting different forms of payment—that is the bare minimum. Ensure the overall experience is not only intuitive, seamless, and reliable, but also adaptable to growth without cluttering the user. Whether it be different payment partners (e.g. Paypal, Stripe) or new payment methods (e.g. Crypto), your front-end and back-end should be dynamic.

  3. Don’t go at it alone (but understand your partnership).
  4. Unless you have a robust financing capability built into your company, it is likely better to partner with a provider for BNPL offerings. Many retailers have done so already. Understand what they bring to the table in terms of financing specialty, payment experience, the GMV growth they claim to bring, and ensure your contract provides you with flexibility if needed.

  5. Seize the revenue opportunity.
  6. BNPL doesn’t have to be a cost. A monthly recurring payment on your products provides a new channel to continue communication with your proven consumers. Leverage the data for the right reach outs and campaigns.

  7. Consider baking in BNPL as part of your loyalty model.
  8. Financing perks can be a differentiator, especially for your most loyal customers. Rethink your loyalty program to offer value to premium members and/or to attract new customers into the program.

  9. Ensure you address the downsides of BNPL.
  10. While the technology is great, it’s not always rosy, and the negative side effects of BNPL can have a potential impact on reputation and customer experience. Think about small ways to be upfront with your customers so they can understand the risks. Regulations are quickly changing in this space, so ensure you stay informed as well!

For any companies looking to talk more about BNPL, feel free to email me at

Image courtesy of Unsplash.


Andrew Popliger

Andrew is an assurance partner and the national technology sector leader at PwC Canada, based in Montreal. He has more than 20 years of experience working with clients from startup through maturity, supporting their journey to scale. His expertise includes global integrated audits, Canadian and SEC reporting, and IPO experience from readiness through to final listing stage.

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