UK Buy-Now-Pay-Later: The State of Play
It’s been a busy few months in the Buy-Now-Pay-Later sector (let’s be honest, when is it not!) with positive results from Klarna, Affirm and Zilch, so we thought we’d take a step back and look more generally at the state of play for the consumer sector in the UK currently. Where is it headed? What should we be looking out for? What do communications and marketing teams in the space need to be thinking about?
BNPL is not a ‘flash in the pan trend.’ It’s here to stay in the UK.
When BNPL first started making waves in the UK market, there were some interesting reactions from some of the more traditional financial players. Some simply dismissed it as ‘dangerous’, some decided to turn a blind eye, and others started slowly exploring their own BNPL products. Klarna’s 18m+ UK customers and the success of Zilch clearly shows appetite amongst UK consumers for more flexible financial solutions that are better suited to their needs. Personally I think it’s unlikely we’ll see a BNPL IPO in the UK in the immediate future, but that certainly hasn’t stopped communications teams from dangling that carrot to media.
For communications and marketing professionals in the space, the tag ‘BNPL’ doesn’t quite have the same negative connotations that it once held. However, there are still those that oppose it as a concept. Brands playing in the space will always, much like more traditional credit providers, always need to focus on responsible use and consumer protection.
Regardless of your personal views on the sector, it’s clear it’s here to stay and regulation will, in some senses, further legitimise it. On that note…
Regulation will have an impact, but it will be more limited than it may appear on the surface.
If you’d have asked me three years ago how big of an impact regulation would have on the UK BNPL sector, I’d have said HUGE. However, while consultations have rumbled on behind closed doors for many years, the biggest players in the UK have either adopted a regulation first approach, like Zilch, or effectively voluntarily self-regulated, like Klarna.
With regulation incoming shortly, there will be change of course. But our view is that it won’t make anywhere near as much impact as it would have years ago. The big players are already prepared, and have been for a long time now.
Regulation may, however, have some unintended consequences…
The UK market is not as competitive as it should be.
While regulation is undoubtedly a positive thing for the space, it may make it more difficult for innovators in the space to enter the market and start challenging the main players. In the UK, the consumer BNPL space is dominated by a few large businesses and regulation will only serve to strengthen the hold these companies have. More traditional financial incumbents have, and will continue to, bring out their own BNPL offerings, but regulation will most likely make it more difficult for smaller, newer market entrants to effectively challenge the sector.
Because of the domination of a few key players, any communications and marketing teams looking at entering the UK space (including Affirm) need to think carefully about how to effectively differentiate themselves. BNPL players can often get bucketed by media and consumers into the same group, but the reality is very different altogether. If you scratch beneath the surface you’ll see that offerings vary wildly. The challenge for marketing, communications and branding teams is being able to show simply and clearly why you’re different and why you’re a better choice than other providers. It’s nowhere near as easy as it sounds.
–
For anyone interested in talking more about the BNPL or wider fintech space, my door is always open at matt.village@fullyvested.com.
