The Buy Now Pay Later Space Is Getting More Competitive in Europe, As New Startups Sprout Up

Investment Boom

Despite continued questions about the ethics of BNPL, many investors are eager to gain a foothold in this fast-growing segment of the market, and the total amount of BNPL corporate financing in the global market is increasing year by year.

The average deal size in 2020 was $113m, compared to just $26m in 2018. This boom is linked to BNPL’s growing popularity, especially in Europe.

By 2025, BNPL volumes in Europe are predicted to hit $357bn, constituting nearly half of the entire global estimate, and 30% of all estimated ecommerce spend. Already in the UK, £4 in £100 in the UK is spent using BNPL, proving especially popular among millennials and Gen Z and soaring further during lockdown.

The benefit for BNPL providers is they take an average cut of 3% of the entire transaction base. This has given way to a pretty resilient business model. These startups’ merchant base constitutes an attractive asset.

Recently, Spanish BNPL player Pagantis was recently acquired by fintech company Clearpay as part of its expansion strategy. In addition, the stock markets also seem to be optimistic about the future of the BNPL sector, with many BNPL companies trading at many multiples their revenues.

Fierce Competition

Nonetheless, it’s worth remembering that Europe’s BNPL newcomers also face competitive pressure from traditional big players. Among them are PayPal, Amazon and American Express, who all recently launched 0% installment payment options.

In addition, Australian fintech firms like Zip, Laybuy and Afterpay (owner of Clearpay) have unveiled plans to spread into continental Europe. They could undercut startups like Twisto, who so far have enjoyed a near-monopoly in their native countries.

What’s more, many startups rely on only a few large customers, which puts them at a particular disadvantage when they face competition. Affirm, for example, gets 28% of its revenue from the fitness equipment company Peloton.