Buy Now, Pay Later series III: major investments in the field

In the last 12 months, there have been a lot of investments in BNPL companies across the world, suggesting once again that they can further show a lot of promise on the market. In Europe only, investments in BNPL companies grew 118% YoY in 2020 to EUR 1.08 billion. They may not inspire trust for the regulators, but they sure do for their investors. We reveal several BNPL providers that have received significant investments, to see what companies to watch further this year and beyond, and what are their strategy for growth.

Proactiveness in the travel industry

Tourism will eventually bounce back and players in this field should be ready to meet the customer’s demands. By helping customers to accommodate their finances, BNPL is an optimal payment method for travelling for those looking to better accommodate their finance, so the two companies took a proactive approach and worked on their services early on.

Uplift, an enterprise BNPL solution available at the merchant’s checkout, has raised USD 68 million in 2021 and 120 million in 2020. To date, Uplift has raised a total of approximately USD 695 million since its founding in 2014. This year, the company has closed several partnerships with airlines, cruise lines and OTAs, which suggest a successful roadmap ahead. With the new funds, the company plans to extend financing to its customers. Uplift is also expected to exceed USD 1 billion in transactions volume over the next 18 months. The only downside here is that these two last investments are debt financing, which means they have to give the money back at some point, and it’s still hard to predict the recovery speed after the pandemic.

UK-based BNPL travel fintech Fly Now Pay Later (which, unlike other similar providers, this one is FCA regulated) secured EUR 39.2 million in funding for developing an app to finance travel. The company will use the funds to develop its proprietary payment technology and to support the launch of its new app, where users can browse travel options. Furthermore, in 2021, the fintech raised approximately EUR 11 million (GBP 10 million) to expand its footprints. A significant milestone is a parentship with UATP, a global payment network owned and operated by the world's airlines – this move could open up even more revenue opportunities for Fly Now Pay Later.

The winner in the France market

Alma, a lender startup, raised USD 59.4 million for its instalment payment option. The company is seen as the Klarna of France because it offers similar services, however, Alma was born in a market highly regulated when it comes to lending and credit services, with strict rules for interest rates to protect consumers from usury. So being a pay later provider in France could be more challenging than in other countries. In order to carry out credit transactions, a lender must be licensed as a credit institution or as a financing company, for this reason, instalments are mostly offered by banks. As there are no credit scoring agencies in France, Alma handles risks in-house, by implementing their own algorithms to detect fraud and high-risk profiles. According to TechCrunch, the funding will be used to attract more merchants and launch two new payment options: a pay later and a to pay now method.

Klarna’s wealthy status

Klarna has raised a nice sum of money in the last 12 months in two funding rounds, reaching now a valuation of USD 31 billion. In September 2020, the company raised USD 650 million in an equity funding round, aiming to further invest in its shopping offers, expand its presence worldwide and consolidate its position in the US, and in March 2021, it added USD 1 billion. Recent news display Klarna as an ambitious competitor for New Zealand’s pay later landscape, as it recently entered this market, and as an entity that makes an impact by encouraging sustainability and supporting SMEs. Above and beyond the successful roadmap, the tensions across Europe mentioned in the previous article still reveal Klarna as being less responsible when it comes to consequences of debt, being mostly focused on providing attractive ways of spending money while neglecting the blind side of it.

The growing US market

As the BNPL industry starts to gain momentum in the US, investors could also see the potential out there. Three companies have raised funds in 2020 to accelerate growth: QuadPay, Splitit and Sezzle.

QuadPay, an instalment platform acquired by Zip, raised USD 200 million in 2020 to expand its offerings across the US. The merger with Zip, which is a well-established pay later company in Australia, and the funding are two factors that set forward the development of this company. Soon after the investment, QuadPay acquired the AI-powered visual fashion search engine Urge to integrate the latter’s technology into its platform.

Splitit, a company that facilitates instalments via credit cards, raised USD 71.5 million in a private placement and share purchase plan (SPP) to further invest in the key sectors such as sales, marketing, product and technology. In 2021, the company spent money well, and facts speak for themselves: a partnership with UnionPay, expansion in Japan, new executive hires and most recently, a payment gateway built exclusively for instalment payments.

Sezzle, a fintech providing instalment options for online retailers, raised USD 55 million through an institutional placement from Australian investors – the company is US-based, also ASX listed. Apart from several partnerships with card networks, ecommerce platforms and merchants that followed after the funding round, a notable announcement was released regarding Sezzle filing for IPO in the US. The company revenue rose from USD 16 million in 2019 to USD 59 million in 2020, but they also reported a net loss of USD 32 million in 2020.

Investment opportunities in fast-growing markets

Apart from the UK and the US, where this industry is beefing up, Middle East is a market where BNPL starts to advance rapidly and build new ecommerce opportunities. Among the companies based in the region, one of them stands out with an investment of USD 110 million led by Checkout.com in April 2021. Tamara is a Saudi Arabia-based BNPL platform founded in 2020 and is already among the most visible players in the Middle East. The company shares the top with Tabby, a UAE-based provider also born in 2020 that raised USD 23 million in December the same year.

In Italy, another fast-growing market for online payments and innovation, Scalapay, raised USD 49 million in a seed funding round. Scalapay also partnered with Raisin Bank, a pan-European deposit marketplace, to allow retailers to offer instalments payments across Europe. The company could be considered Klarna’s competitor, although, Scalapay is fairly new in the ecosystem and Klarna strengthens its position in Italy by exploiting the surging ecommerce penetration with its products and newly established product development hub in Milan.

Among all the above notable investments, there is also Zilch, a UK-based direct-to-consumer BNPL company that raised USD 80 million, now bringing the total value to USD 500 million. Its business model is slightly different than the other players – their payment method is not integrated into the checkout via a third party, the consumers only insert Mastercard virtual card details, which then launches the option to them to either pay in instalments or as they would with a normal credit card.

The bottom line

If we look at the recent concerns expressed by regulators regarding consumers protection, we could say that it’s a fragile business environment. Yet the current size of the market shows us a prosperous future for these companies with further growth expectations, especially with so many forecasts showing the opportunities that lie ahead. Certainly, investors have helped these companies to build a high-speed rail ahead, by pushing forward their expansion and product development plans. While waiting for the results of all their plans, we should keep an eye on other driving trends that may arise and determine the speed this industry is advancing to further disrupt the payments ecosystem.

This article serves as a summary and is for educational purposes only. It is not intended to offer investments advice. 

About Anda Kania