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British Fintechs Flock To Enter The Booming Buy Now, Pay Later Market

British Fintechs Flock To Enter The Booming Buy Now, Pay Later Market
The “buy now, pay later” industry in the United Kingdom is booming and the two latest British firms to jump in the fray are Monzo and Revolut, two of the best known financial technology companies of the country.
Fast gaining popularity, the buy now, pay later or BNPL system of payment allows users to disperse the price they have to pay for a purchase over a period and pay it through a series of installments that are interest free. Companies such as Swedish fintech Klarna and Australian firm Afterpay were pioneers of this trend.
The trend is now getting attention from a few of the largest companies of the world. For example, PayPal recently launched its own BNPL service while a partnership with Afterpay has been struck by Amazon and Apple. Afterpay is currently owned by Square, the payments firm that is owned by Twitter CEO Jack Dorsey.
Monzo and Revolut, the hottest fintech companies of the UK, are now trying to get into the trend.
According to reports quoting sources within the company, plans to launch its own version of BNPL are being made by Monzo, which offers checking accounts through an app. Affordability checks on customers would also be introduced by thee digital banks, said the reports.
Revolut was also developing its own pay-later product, the CEO of the company said in an interview to London’s Evening Standard newspaper earlier this week. Revolut offers digital banking and trading services to customers through its app and a recent $800 million funding round led by SoftBank and Tiger Global valued the company at $33 billion.
However, Revolut is a regulated bank in the UK, unlike Monzo. Revolut is currently attempting to secure further licenses to operate in Britain, the United States and Australia, even as the firm had been granted a European banking license in Lithuania.
Compared to Revolut, Monzo is smaller in size with just 5 million customers and a valuation of $1.7 billion. In comparison, there are more than 15 million users with it, claims Revolut.
Another popular digital bank in the UK is Starling which claims to have more than 2 million customers and had a valuation of £1.1 billion when it was valued the last time.
The regulators have also taken note of the fast growing BNPL industry.
Regulation for the sector is being planned to be introduced by the British government. Earlier this year, the Treasury department of the country announced proposals for regulation of the industry which included the mandatory affordability checks of customers by companies offering the service prior to lending out as well as the ability to escalate complaints to the financial ombudsman of the UK. 
The BNPL market of the UK is worth £2.7 billion, and since the start of the coronavirus pandemic, such products have been used by 5 million Brits, says a review published by the Financial Conduct Authority in February.
“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 11:FS, said.
“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.”

Christopher J. Mitchell

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