In recent weeks a number of stories have broken which show the huge growth of Buy Now Pay Later and its continuing potential to disrupt how we make (and how businesses will take) payment for goods and services.
These include Square (whose chief executive Jack Dorsey is also Twitter's CEO) announcing a $29bn offer for Afterpay, Amazon's partnership with Affirm, Ikea's investment in Jifiti, and Klarna's valuation at $46bn in June. Most recently, online Bank Revolut has announced its intention to move into the space and international provider Zip (who our team has supported with its UK expansion over the last 18 months) has completed a number of international acquisitions and partnerships.
The model is here to stay and seen as an obvious alternative to legacy store and credit cards.
While "traditional" BNPL has involved direct integration between the merchant and the provider, we are now seeing a proliferation of different models including affiliate arrangements and virtual card offerings. The range of ways in which BNPL payments can be deployed is growing as new providers look to innovate and improve the customer experience.
As well as making sure that their contracts appropriately reflect the particular BNPL models being used, providers and business users should consider where and how those models fit with the regulations on payment services and consumer credit - particularly as they start to become more sophisticated.
Whilst existing exemptions in the UK's consumer credit rules mean that some BNPL models, their providers, and the merchants who use them, may avoid the need to be authorised, we are currently waiting for the outcome of a major review by the regulator of the rules in this space - which could change things.
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