THE GLOBAL buy-now pay-later (BNPL) credit market will swell to $607bn (£494bn) by 2026 despite increased regulatory scrutiny of the sector, analysts have predicted.
BNPL firms were given a first taste of regulation in the UK this week as the Treasury set out a framework for the Financial Conduct Authority to clamp down on the sector, raising questions over whether the astronomical growth seen in the last two years would slow.
But analysts at data firm Globaldata ramped up their growth predictions globally, telling City A.M. usage was set to balloon to $607bn despite the increased scrutiny.
"Regarding our forecast of the BNPL sector, we revised our data and we are now projecting the global BNPL market to reach $607bn by 2026 despite the regulations," Chris Dinga, payments analyst at Globaldata, told City A.M.
"The sector is still young, only representing 2.5 per cent of global ecommerce. And we are expecting incumbent companies and banks to launch their own BNPL solutions."
He added that fintech BNPL providers will increasingly need to compete with established firms like banks who have more cash reserves and can pump funding into BNPL strategies.
Apple announced plans to push into the space this month, with banks including Natwest and Santander already moving in.
It comes after a report by Globaldata found in May that payments on BNPL products swelled to $120bn last year as shopper flocked to BNPL products through Covid-19 lockdowns.
Rapid growth in the past two years has seen watchdogs swoop in on the space, with regulation in the UK now set to come in from 2023.
The regulatory framework for the sector in the UK laid out by the Treasury this week will require firms to carry out checks on consumers to ensure they can afford loans, as well as allowing consumers to take complaints to the Financial Ombudsman Service.
Many BNPL firms have moved to implement changes already, with some firms voluntarily providing information to UK credit agencies, including Klarna which started sharing data this month.
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