This is the only unsecured-lending asset class that has experienced high-double-digit growth through the COVID-19 crisis. POS financing’s expanding role in unsecured lendingĬredit originated at point of sale is projected to continue its growth from 7 percent of US unsecured lending balances in 2019 to about 13 to 15 percent of balances by 2023, according to data from McKinsey’s Consumer Lending Pools (Exhibit 1). The insights are based on McKinsey research, including McKinsey Consumer Lending Pools (a proprietary database covering granular market size and growth trends), the McKinsey POS Financing Consumer Survey and POS Financing Merchant Survey, and our recent experience with banks and merchants. It provides an overview of the market, details key trends and factors influencing growth, and offers ideas for market entry for banks and partnerships for merchants. This article seeks to give POS financing players as well as merchants the necessary insights to refine their strategies in the POS-financing arena. To avoid that outcome, US banks need to understand the landscape for POS financing and choose from among the emerging models. Banks that underestimate the threat may see continued loss in share and could lose out on participating in a growing value pool and gaining share among younger and new-to-credit customers, as banks in Australia and China did when facing a similar situation. In our view, only a few banks are responding fast enough and boldly enough to compete. Thus far, fintechs have taken the lead, to the point of diverting $8 billion to $10 billion in annual revenues away from banks, according to McKinsey’s Consumer Lending Pools data. “Our collaboration with KKR will allow us to accelerate our PayPal Pay Later originations alongside market demand in Europe while preserving free cash flow for other strategic initiatives.This article was a collaborative effort by Puneet Dikshit, Diana Goldshtein, Blazej Karwowski, Udai Kaura, and Felicia Tan, representing views from McKinsey’s Financial Services Practice. “Buy now, pay later has become a major asset to PayPal’s checkout experience, driving engagement, payment volume growth, and repeat use while delivering high-value customers to our merchants,” said Gabrielle Rabinovitch, senior vice president, acting chief financial officer at PayPal. In 2022 it processed more than $20 billion of BNPL payment volume, an increase of 160 per cent from 2021. The company claims it has issued more than 200 million loans in eight markets around the world. PayPal launched its first BNPL products in 2020. The company plans to spend around $1 billion on incremental share buybacks this year increasing the predicted total to $5 billion in 2023. PayPal said the agreement will initially generate around $1.8 billion. The agreement is subject to certain conditions and is expected to complete in the second half of this year. PayPal will remain responsible for customer-facing activities, including underwriting and servicing associated with European BNPL products. KKR’s private credit funds and accounts will acquire all of PayPal’s European BNPL portfolio at close of transaction, along with future originations of eligible BNPL loans. Global investment firm KKR has announced an exclusive multi-year deal to buy up to €40 billion of buy now pay later (BNPL) loans from PayPal.
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