BNPL: Disruptive trends, main players, and embedded coverage

Buy now, pay later or BNPL is a kind of credit payment that allows customers to purchase goods and pay for them either later or by installments. Interesting facts about BNPL: they are not regulated like credit instruments hence their popularity in usage and distribution.

Providers such as Klarna, Affirm, Afterpay, Quadpay and PayPal enable customers to shop online or in-store without having to pay straight away. And it’s working, as the average order value is typically higher, and checkout conversions surge 30 percent for retailers using BNPL.

According to Kaleido Intelligence, a fintech consulting firm, by 2025, $680 billion will be spent using ePOS finance/Buy Now Pay Later (BNPL).

The fintech companies operating in the BNPL industry have grown exponentially over the past two years. Between 2018 and 2019, BNPL app downloads increased 162%, according to the March 2020 “Buy now, pay later” monitoring report published by In its annual report for 2019, Stockholm-based Klarna confirmed that the number of monthly active users reaches 11 million consumers worldwide and that the platform processes an average of 1 million transactions per day.

In the US, these numbers kept growing in 2020.

As consumers spend more time online, the COVID-19 crisis will certainly continue to stimulate the growth of BNPL operators.

Why are Americans using BNPL?

Covid-19 left millions of consumers unemployed and in a very difficult financial situation. Americans were in need of greater flexibility with their purchases and Buy Now Pay Later was the perfect solution.

As more and more customers are buying online, the younger generation of users in the US started to use BNPL over credit card payments to avoid paying fees or credit card interest. BNPL is also a simple way to buy goods or services without credit checks even if the price wouldn’t fit in the budget.

Most of the users of BNPL are high-income consumers, with a high level of education and already owning a credit card. These consumers of Buy Now Pay later services are mostly millennials. But it’s also very dangerous. According to a study by Credit Karma, nearly 40% of U.S. consumers who used “buy now, pay later” have missed more than one payment, and 72% of those consumers saw their credit score decline.

The BNPL Actors

The main actors are coming from every part of the world. Affirm, Klarna, Quadpay, AfterPay and Paypal are the leaders in this market.

And PayPal is for now the solution that you can find almost everywhere.

Despite those figures, a clear winner is still to be determined. But the banks and the payment networks are losing access to critical data about the consumers and soon the BNPL providers will become a prevailing payment method for merchants on top of traditional credit cards, as they will collect data and instruct behavior and patterns about the segment of consumers they specialize in.


BNPL has grown tremendously the past 5 years and especially during the Covid-19 crisis.

The type of clients described in our article are favoring installment payments over credit cards to avoid paying fees and to give them new payment capabilities.

Risk in using BNPL can be also material, as it can influence consumers to make unnecessary purchases. The missed payments will carry heavy penalties and the interest rate can skyrocket if you don’t pay off your balance in time. Having insurance on these risks might be the smart solution. This certainly calls for credit insurance and coverage add-on accompanying BNPL directly at check-out ; or even embedded at PoS (Point-of-Sale).

The convenience payments and embedded insurance are converging in usage and economics and this is an underserved market for insurance distributors (managing general agents and brokers), where novel insurance solutions might address well.

It’s therefore a unique opportunity for insurtech such as OTONOMI to gain market share versus its competitors, especially with technology infrastructure such as Open APIs (Application Programming Interface) and integration of digital wallet payments.

With our partner FlyWallet (an up-and-coming travel BNPL), we developed a product of embedded insurance with a simplified and transparent user experience, that fit perfectly the demands of consumers with convenience payments.

“You fly and forget about the rest.”

Flywallet reduces the up-front cost of travel, by providing automatic saving, split payments, crowdfunding and insurance. Otonomi provides transparent, automated insurance to eliminate the downside and risk of missed payments for consumers and lenders. Everyone wins!

Stay well. Be safe.