How the Buy Now Pay Later Industry Is Expanding Credit Access

Ma-Keba Frye  |  March 16, 2021   |  Credit & Lending  


Amid the pandemic-fueled online shopping craze, the buy now pay later industry (BNPL) has grown significantly, accounting for $20-25 billion in transactions in the U.S. in 2020. While payment plans aren’t new to the retail industry, the fintech BNPL model is a relatively recent phenomenon. Compared to traditional layaway plans where the store holds on to the product until the full payment is received, BNPL allows consumers to receive their purchases immediately while paying in installments. 

As younger consumers grow less inclined to use traditional credit cards and the unbanked population faces limited access to credit, BNPL payment models provide both groups with an alternative method to finance their purchases. With this relatively new payment model’s usage rapidly increasing, it’s essential to understand its place in the retail industry, how it’s improving financial inclusion, and how alternative data is fueling the underwriting process. 

Gaining momentum during the pandemic

In the U.S., the BNPL model is currently the fastest-growing online payment method. Although it’s been around for some time, the impact of COVID on online consumer shopping habits resulted in a spike in BNPL usage. The U.S.-based fintech Affirm nearly doubled its revenue from $264.4 million in 2019 to $509.5 million in 2020. As of September 2020, Affirm had seen a 63% increase to 3.9 million users. 

By 2025, the BNPL industry is expected to grow to 10-15x its current volume, topping an estimated annual gross merchandise volume of $1 trillion.

Retailers turned to this innovative credit option to attract more shoppers, increase consumer spending, and decrease cart abandonment. Additionally, the BNPL service has helped merchants gain repeat customers as 65 percent of Afterpay users have made at least two purchases with the same merchant. The credit option’s growth isn’t expected to end anytime soon; by 2025, the BNPL industry is expected to grow to 10 to 15 times its current volume, topping an estimated annual gross merchandise volume of $1 trillion.

How BNPL solutions use alternative data

When it comes to accessing credit, alternative data can open up a world of possibilities. Fintechs, including BNPL companies, have increased accessibility to credit and lending opportunities for consumers by broadening the spectrum of ways to evaluate applicants. BNPL services in particular often rely on alternative data sources like utility, rent, telecom, and streaming service payments. 




BNPL services rely on soft credit checks, turning to non-traditional credit data to enable fast and easy credit approvals that still provide accurate insight into a consumer’s creditworthiness. By using alternative data sources, BNPL companies can look beyond a traditional credit score and aggregate data points that paint a fuller, more complete picture of a consumer’s ability to pay.

Creating new credit opportunities

“Technology is the best enabler of banking the unbanked.”

The BNPL credit model has been advantageous not only for retailers but also consumers. For those who want to avoid paying high-interest rates, those making purchases outside of their usual budget, and especially for those who lack sufficient credit profiles, this payment method is the ideal solution. 

In February of 2021, Sultan Meghji was appointed as the first chief innovation officer of the FDIC. In a statement about his role, Meghji discussed the difficulties that the unbanked population faces when it comes to fully accessing the nation’s banking system. According to Meghji, “technology is the best enabler of banking the unbanked.”

That’s why innovations like BNPL solutions play a significant role in improving financial inclusion. Thanks to soft credit checks, non-traditional data, and an easy and convenient application process, 1.7 billion unbanked adults around the world can gain better credit and more financial independence. For Gen Z, millennials, and other underbanked populations, the transparency, accessibility, and consistency offered by installment payments is a gamechanger.




How utility data can support the buy now pay later industry

As consumer shopping and spending habits continue to change and retailers see sales increase substantially, the buy now pay later industry is here to stay. More consumers are vying for convenience and a subscription mindset regarding shopping trends, making buy now pay later options ideal for their current lifestyle. With the buy now pay later industry poised for considerable growth, fintechs will need more alternative data sources to support the credit decisioning process. 

Urjanet’s alternative data platform gives companies automated, direct, and secure access to consumer utility and phone payment history to support credit risk decisioning. Interested in learning how utility and telecom data can enhance your scoring models? Speak with one of our experts today. 


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About Ma-Keba Frye

Ma-Keba Frye is a Content Marketing Associate at Urjanet, assisting with content development and execution. When she's not writing, she enjoys reading, listening to music, and volunteering.

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