The Business Model Behind Buy Now, Pay Later Apps

Buy now, pay later companies like Affirm, Klarna and Afterpay boomed during the pandemic as consumers looked for an accessible alternative to credit cards. But even as their customer bases grow, these companies are struggling to turn a profit. 

PayPal, Apple and even credit card companies themselves are trying to get in on the action. 

WSJ explains how these services work, how they differ from traditional credit card payments and why some consumers have concerns.

Is ‘Buy Now, Pay Later’ the Future of Consumer Lending?

Major specialists like Klarna, Afterpay and Affirm, as well as payments giant PayPal, are raking in big bucks financing consumer purchases. They are playing a different game than many banks and credit unions. But amid this tectonic shift there may be opportunity for traditional institutions — in part by picking up the pieces.

That buy now, pay later purchasing is booming is indisputable. It’s a story that’s been building up over the course of the last several years. Predictions that it would surge to new heights during the 2021 holiday shopping season were supported when PayPal CEO Dan Schulman, appearing on CNBC, crowed that on Black Friday, “our volume on buy now, pay later was up almost 400% year over year.”

Schulman added that his company’s “Pay in Four” installment plans proved to be “one of the stars, actually, of the holiday season for us.”

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Facebook Pay’s Expansion Plans Might Get No ‘Likes’ From Big Tech Rivals

The mobile wallet race officially became the mobile wallet war  last Wednesday, after Facebook announced plans to support the use of its Facebook Pay system on sites outside of its ecosystem. 

This first big step into the wider world of payments would have been less remarkable had it not involved Shopify’s 1.7 million merchants as its inaugural external test case. It was a move that gave the Facebook endeavor an immediate degree of credibility and surely caught the eye of wallet-space heavyweights like Apple, Google, PayPal, and more.

PayPal launches "Business in a Box" service for small firms

PayPal has just unveiled a new service, called "Business in a Box" designed specifically for small firms. The service brings together a range of tools aimed at helping small firms start and run their online operations.

PayPal says that the service will benefit entrepreneurs setting up a business for the first time as well as firms looking to make a move onto the Web, making it easy to access a range of tools all tied together from a PayPal Business account.

Why Bitcoin and PayPal Aren't Real Threats to the Big Banks

From The Street –

“As purchases with dollar bills give way more and more to digital transactions, are the country's banks at risk of experiencing the same fate as the vinyl-record stores of the 1970s and video-rental chains of the 1990s?

That was the question U.S. Comptroller of the Currency Thomas Curry posed Wednesday -- and answered firmly in the negative. The head of an office that oversees more than 1,600 banks with $10.9 trillion in assets, Currry argued that established U.S. banks will keep their competitive edge against online platforms such as PayPal and digital currencies like Bitcoin. Brick-and-mortar shops like Bank of America (BAC - Get Report), JP Morgan Chase (JPM - Get Report) and Wells Fargo (WFC - Get Report) can rest easy, he said.”

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It took 17 years, but PayPal is finally becoming a mobile payments company

From QUARTZ –

“In 1998, when Max Levchin was building what would become PayPal, he did it specifically for one device: the Palm Pilot. So it’s safe to say that the digital payments platform has envisioned itself as a mobile company from the very beginning.

But it took 17 years to actually become one.

Payments on the Palm Pilot were simply too far ahead of their time. PayPal took off, but it was on desktop computers. In 2010, mobile payments comprised less than 1% of the company’s transaction volume. By the first quarter of 2015, however, the figure had soared to 30%.”

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Australian Banks Plan Billion-Dollar Upgrade to Allow Real-Time Payments

From Coin Telegraph

“Australian bankers are feeling the pinch as the Bitcoin community grows ever larger in the country, and the banks are planning to spend AU$1 billion on an upgrade that will decrease processing time.

The number of merchants that are accepting Bitcoin, and of exchanges that are buying and selling virtual currencies, grows every day. The future of Bitcoin, especially as the currency relates to taxes, is still up in the air in Australia, but bankers are already seeing a potential threat, unless they improve their own services. ANZ chief Philip Chronican summed up some of the concerns that banks in Australia are currently addressing:

Banks have certainly embraced computer technology, but they still find themselves falling far behind other paradigms, especially when traditional payment platforms such as PayPal, and virtual currency platforms such as BitPay, are able to instantly transfer huge sums. Merchants are often forced to wait for days after each sale before their funds are deposited in banks.”

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The unfortunate state of mobile payments

From The Stanford Daily

“The history of mobile payments is, upon initial examination, a puzzling one. There are very few ideas in the tech industry that are as clear in their potential utility as user-friendly contactless payment. Enabling technology like near-field communication (NFC) chips has been available for years in both smartphones and retail registers. Mobile payments promised not only to deliver a better user experience, but also to lower the transaction cost for merchants, provide a timely opportunity to ditch the fraud-prone credit card system that has been with us since the 1960s and rethink payment security from first principles.

So why is the history of mobile payments littered with the corpses of ambitious challengers? In the 16 years since the founding of PayPal, why can we still not pay at the Safeway checkout counter with our PayPal accounts? Google Wallet launched over three years ago and to date has failed to achieve any meaningful market penetration. Infamous Stanford startup Clinkle set out to create a revolutionary mobile payment system and ended up shipping a glorified rewards credit card. Meanwhile, Square’s IPO dreams were crushed by the reality that it remains unprofitable.”

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