Andréa Toucinho from Partelya Consulting discusses how the BNPL trend, catalysed by ecommerce, is reshaping the European payments landscape.
Launched in the 2010s thanks to the development of ecommerce, the concept of Buy Now, Pay Later (BNPL) is about to enter a new chapter in the European payments ecosystem. Famous for its opportunities in the context of an economic crisis, BNPL is also a point of attention for the European and national regulators that aim to safeguard consumer protection in times of macroeconomic and geopolitical instability.
Today, the development of BNPL is often seen as one of the main trends in the European payments ecosystem – but it is important to acknowledge that this concept represents different realities according to the specificities of each European country. In France, for instance, two main offers have been developed: a deferred payment of 15 or 30 days – and a purchase split in three or four (usually interest-free) payments over a period of approximately 90 days. Thus, if the payment is deferred or split over a period of more than 90 days, it is no longer regarded as BNPL, and it becomes a consumer credit, according to French legislation.
This payment method has become increasingly popular in France. According to the French ecommerce association FEVAD (Fédération du e-commerce et de la vente à distance), the acceptance of BNPL ranges from 80 to 90% in France, and it represents 20% of the total of ecommerce transactions.
This trend is also confirmed at a European and international level. According to the same organisation, BNPL counted for USD 90 billion in 2020, and it may soar up to USD 250 billion by 2025. Similarly, 60% of Europeans have already used BNPL, and one in four Europeans selects an ecommerce brand that offers this payment option. Thus, France is not the only country in Europe that is adopting this trend. According to the second edition of the FLOA – Kantar report on payments in Europe that was published in 2023, France, Spain, and Portugal have the highest number of users of BNPL services across Europe. Another key insight of the report suggests that while BNPL is often regarded as an asset to manage spending, consumers may also see it as a way of responsible shopping – for instance in Italy and Germany.
Despite these observations, the risks of BNPL represent a top priority for the national and European regulators. In France, for instance, an important, historic step has been achieved in 2010 with the Lagarde Law that addresses the enhancement of consumer protection measures in the field of consumer credit, with a strong purpose: the struggle against over-indebtedness.
The law states that consumers are protected against abuses, such as credits that are never reimbursed, and there are specific initiatives to help people who live with over-indebtedness issues. Confronted with the development of digital uses, the national and European regulators aim to adapt the legislation to elevate consumer protection. This is why, at a European level, we saw an evolution of consumer credit legislation to integrate these new provisions.
Among the key priorities of the European regulators are the necessity to protect consumers from dangerous products and the need to foster information transparency and financial literacy throughout Europe, with the aim of making the market and the consumers more responsible.
This same idea is shared by the French regulator Autorité de Contrôle Prudentiel et de Résolution (ACPR), which published, in July 2022, a report about the situation of BNPL in France. According to ACPR, some key aspects of the commercialisation of BNPL need to be addressed by the participants in this market: first, the commissions charged, along with providing transparency about other additional fees; then, the consumers’ information that is being stored.
According to ACPR, it is important to clearly mention the nature of the product since many consumers are not aware of the accountability associated with this type of service. Another key point of the report tackles the analysis of solvability, as a simple analysis of the payment cards is not sufficient to ensure the financial responsibility of the consumer. Thus, it is also important to study the clients’ financial capacity and the other credits they might have accessed.
The legal aspects and the necessity to review and sign a contract are other significant factors contributing to increasing consumer awareness.
This testifies to the fact that currently the BNPL market is in a transition line between a context of opportunities – deriving from the development of ecommerce and a strong environment of crisis implying the necessity for consumers to have more payment facilities – and a regulatory vigilance linked to the need of protecting consumers.
The stabilisation of the market will not happen overnight, as the answers to some problems will probably only be available in the next years. This is strictly linked to the evolution of the regulations and strategies employed by the actors of this market. They will need to define a balance between opportunities and vigilance in accordance with the requests of the regulators.
This editorial piece was first published in the Payment Methods Report 2023, which provides an in-depth overview of the latest worldwide developments in how people pay, the payment methods space, the innovative technologies that these methods work upon, and the best strategies on how to win at conversion and retention.
Expert in payments and financial services, Andréa Toucinho is the Director of Studies, Prospective and Training of Partelya Consulting and Country Ambassador for France of the European Women Payments Network (EWPN). She published several editorials about payments as the representative of two national fintech associations – AEFI Spain and AFIP Portugal.
Partelya Consulting is a French consulting company specialising in payments. Created in 2008, it works with all actors in the market, from banks to schemes and retailers, on technological, strategic, and regulatory issues. The company is a member of the French Association du Paiement, and it contributes to several projects linked with payments and innovation.
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