This is why SplitIt will emerge from the pack. SplitIt (via credit cards) have an extensive credit card network reach, cheaper rates and a credit risk management process that has been tested over time..
Moody’s isn’t optimistic, predicting “few BNPL companies will remain independent.” “Some may be acquired, others may cease operations if their products cannot remain competitive in the market, or if they are unable to navigate the impending wave of regulation,” the report said, noting an Australian BNPL company, Openpay, shut down in February.
Still, the momentum of BNPL growth may not be sufficient to overcome a multitude of other challenges, the ratings agency said.
Specifically, competition in the BNPL arena is intense, with low barriers to entry allowing a slew of startups to enter the market — resulting in some 200 companies calling themselves BNPL providers last year, according to the Moody’s report.
Nonetheless, the bigger threat comes from large banks jumping into the ring. National Australia Bank, NatWest, Santander Bank, Citibank and JPMorgan Chase are among the banks offering BNPL-type services now, the Moody’s report said. Those financial institutions also have an advantage over BNPL companies in that their credit card networks have extensive reach and may offer services to merchants at lower rates, not to mention their more tested credit risk management, the report noted.
In addition, tech giant Apple this year rolled out its Apple Pay Later service in another move that boosted competition. Apple’s offering, backed by bank Goldman Sachs and card network Mastercard, has immediate extensive reach through its dominant position in the digital wallet market, Moody’s said.
Aside from competition, another obstacle for the industry is rising regulation worldwide. Moody’s enumerated regulatory moves to rein in BNPL in the U.S., the U.K., Sweden, Singapore and Australia as well as by the European Union. With regulators seeking to protect consumers and ensure all BNPL financing abides by the same standards, profits may shrink and compliance costs will likely rise, Moody’s predicted.“
To survive, BNPL firms must slash costs or increase revenues while maintaining volume growth and market shares,” Moody’s concluded. If they cannot, rising competition from incumbent banks and large tech companies will likely push many from the market.”
The Next Chapter, page-4396
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