Buy now, pay later is just a piece of Fintech Puzzle

A recently published U.S. regulatory investigation into split payment services has stunned investors, with shares of players like

Affirm Holdings

AFRM -0.72%




dropped sharply in recent sessions. But investors need to react less now and more then.

Consumer Financial Protection Bureau on Thursday ask some “Buy Now, Pay Later” or BNPL, providers for information regarding some concerns about short-term installment plans. Their concerns include some typical consumer protection issues, such as whether customers are clear about when payments are scheduled and policies on late fees.

Any questions regarding fees raise the specter of lost revenue. But investors should keep in mind that consumer fees aren’t necessarily a big part of BNPL’s business model as it grows. Instead, short-term installment service providers primarily aim to monetize what sellers pay to provide services to shoppers. In fact, sellers can cover some of the credit costs with what they pay, in exchange for potentially generating additional or greater ticket sales.

Perhaps more notably, the CFPB also said it was exploring questions about “collecting data” from “valuable payment history.” As the CFPB notes, competitive pressure on the prices merchants pay for split payment services may require other ways of making money. With that, suppliers may increasingly need to do more than just provide a basic service to attract sellers, such as help direct shoppers to sellers or entice shoppers with Deals. It’s still not entirely clear what regulators are concerned about BNPL versus digital payments in general in this regard, but the CFPB’s findings here are being watched closely.

Overall, the landscape continues to evolve rapidly. The Wall Street Journal reported that


early next year will start recording payments on other BNPL packages. This expansion could have different implications for the industry. If it helps give a picture of the overall debt picture of consumers with BNPL included, it might even alleviate some of regulators’ concerns.

More broadly, BNPL is rapidly becoming part of a broader business model.


Offering split interest payments is part of an existing array of services available to consumers and merchants. Afterpay is merged with


formerly known as Square, making it part of an extensive banking and payments platform. Affirm also offers long-term payment plans through its lending partners and is rapidly expanding its financial services. So BNPL is now often just part of the digital wallet The “super app” strategy.

Many fintech stocks have had a wild and volatile year, so investors shouldn’t be shocked when stocks fluctuate wildly on any news. Affirm has nearly doubled its initial public offering price in January. But moving into the next year, the key drivers of BNPL-related stocks could be much more distinctive than industry directions. Affirm’s Progress great partnership will be closely monitored; Block and PayPal are giant fintech companies with their own unique drivers.

The big theme like “buy now, pay later” has come up this year, it will only be part of the story going forward.

Many are calling decentralized finance, or DeFi, the “Wild West of Finance”. This rapidly growing industry aims to make crypto-automated banking services available to everyone, with no middleman. But DeFi is still in its early stages, which means there are risks. The WSJ explains. Artwork: Tammy Lian / WSJ

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