• Nick Holt, Head of Solutions and Delivery, Europe at Marqeta


• 04.12.2023 12:30 pm
#payment #bnpl #trends

Buy Now, Pay Later

Consumers will most likely continue to battle against the rising tide of the cost-of-living crisis and high inflation in 2024. As a result, payment options that provide the most convenience and flexibility will become increasingly popular. Specifically, consumers are likely to use solutions which offer convenient access to short term credit instalments to ease their financial burdens during periods of economic uncertainty. For example, recent Marqeta research found that 38% of UK respondents have used BNPL services to make ends meet during the last 12 months, increasing to 61% amongst 26-34 year olds. The research also found that individuals generally opted for BNPL due to zero interest being charged, and the increased flexibility to help with budgeting. 

With BNPL giant Klarna soon to debut its Initial Public Offering, demand for the credit service is set to ramp-up in 2024, with Deloitte, forecasting that the BNPL market will become a €300 billion industry in Europe by 2025, making up about 11% of the continent's ecommerce market.

As consumer use of BNPL increases, the payments industry is likely to see a structural and cultural shift towards short term credit as it increasingly loses its stigma and consumers look to manage their finances. Rather than working in opposition to credit cards, and even being a ‘credit card killer’, BNPL will increasingly provide savvy consumers with a tool to help build credit and secure access to more flexible, additional credit services. 

Artificial Intelligence

Against a backdrop of economic uncertainty, consumers are also reevaluating how new technologies can help with budgeting, investing and increasing savings, and Marqeta’s Consumer Pulse survey found that over a third of consumers generally say they’re interested in using Generative AI (GenAI) to help manage their finances, rising to more than 50% for those respondents under the age of 50. 

While we can’t foresee the full impact that the integration of AI will have on financial services, I predict consumers will soon be able to use Gen AI to get personalised, real time updates on their finances which will improve their financial literacy and wellbeing. I would also predict that the deployment of AI could lead to new credit options emerging, such as “Predictive Credit Cards,” where AI anticipates a consumer’s spending needs based on their past behaviour and adjusts the credit limit or offers tailored rewards accordingly. Increased automation and data analysis could also revolutionise how consumers apply for and obtain credit, as due to the scope of accessible information widening, individuals credit applications could be analysed and considered outside of a traditional, singular credit score. 

Embedded Finance

Consumers are becoming increasingly comfortable with accepting financial services from brands rather than traditional providers.  According to Marqeta’s 2023 State of Credit Report, almost a quarter of UK consumers own a credit card affiliated with a brand, and 54% of them consider themselves a customer of the brand instead of the bank. 

This trend is likely to accelerate over the coming months, with a growing number of brands offering embedded credit card services directly to customers and utilising personalised transaction and usage data to enhance experiences, meaning individuals can be engaged with in a whole new way.  For example, embedded card services means that brands can offer contextualised, price competitive credit and rewards and incentives which are fully integrated into the shopping experience. 

As a result, I think potentially the biggest topic in payments over the coming months will be, the humble credit card becoming the new homepage for the brand experience. As the availability of hyper-personalised embedded virtual cards increases, brands will be able to adapt to changing consumer activity, such as increased demand for rewards (according to Marqeta’s State of Credit report, 38% of UK and US consumers surveyed say that the top feature they look at when evaluating a new credit card is rewards), while encouraging consumers to make the most out of their finances and widening access to credit.