Affirm and Klarna both moved to strengthen their positions in the buy now, pay later (BNPL) market, which is expected to reach $680 billion by 2025, per Kaleido Intelligence.
Here’s the scoop:
BNPL keeps getting more popular. In July 2020, 37.65% of US adults had used a BNPL service—by March 2021, that figure shot up to 55.8%, per The Motley Fool, indicating a substantial rise in consumer demand and adoption. And that momentum will likely continue: More than 50% of consumers who haven’t used a BNPL service are at least somewhat likely to use it in the next year, according to The Fool. Affirm’s and Klarna’s recent moves should help them capitalize on growing BNPL popularity as they bring their solutions to more customers.
But competition is fierce—making growth opportunities all the more important. Affirm, which once dominated the US BNPL market, has quickly lost US market share to foreign players: In Q4 2018, Affirm accounted for 78% of US BNPL app downloads, but by Q1 2021, that figure had deflated to just 16%, with Klarna and Afterpay each marking up 34% and 26% of BNPL app downloads, respectively, according to Sensor Tower. In-store expansion and mobile solutions in part helped Klarna pull more customers into its ecosystem and quickly become a formidable competitor in the BNPL space. Meanwhile, firms like Uplift that capture niche sectors such as travel in the BNPL market are also contributing to heightened competition. Affirm’s Shopify partnership should help it regain market share by tapping into a larger pool of customers, and Klarna’s recent funding might go toward developing additional retail solutions as it looks to expand its global footprint, boosting market share.