If you want to make big money in the growth field of fintech, there’s a new acronym you absolutely need to know about; BNPL, or “buy now, pay later.
Right now, it’s on its way to capturing 5% of global e-commerce sales (excluding China).
And while that might sound like a small percentage, there are actually big bucks at play here. We’re talking about a value of $166 billion. It’s a figure that’s more than big enough to let us crush the market.
The key to all of this is a growth-centric firm that is pioneering this field to a very profitable effect.
It beat the market’s historic return last year by a stunning 180.6%.
Let me show you why the stock is already on pace to double again in less than three years…
Now then, since most consumers have borrowed money in the past or use a credit card that they pay off later, they are familiar with the basics of BNPL.
But this time there’s a twist, and it’s threatening to disrupt the $1.1 trillion credit card industry.
Put simply, BNPL is what it’s called when online merchants offer customers the option to, you guessed it, “buy now, pay later” at checkout.
In effect, these are short-term loans, paid off in four or so installments, and usually interest-free.
That zero-interest is only one of the advantages BNPL has over credit cards, too. BNPL also often comes without any fees and can be accessible to people without credit history.
There’s also an appeal to not having to add to one’s debt because America is swimming in it. The average household now has $7,000 in credit card debt, paying around $1,200 in annual interest.
Younger generations may have it even worse, as the college graduating class of 2018 left with an average debt of $29,200. That’s the highest ever.
But with BNPL, you’re really just cutting one big payment into a few smaller chunks. That reduces “sticker shock,” making sure people can buy what they want – and merchants see more sales of higher-priced items.
The best part is that customers can apply for BNPL right there at checkout at participating merchants, and instantly get notified about whether they are eligible or not. Compare that to the weeks it takes to apply for a credit card.
To compete with the added flexibility of credit cards, some BNPL providers let customers choose from a variety of repayment periods, including longer ones with interest.
For retailers, BNPL is a no-brainer. They get paid in full, up-front, by the BNPL provider, minus a small fee that is about the same they would pay to the credit card companies anyway, if not less. And as I mentioned, merchants see more sales of higher-priced items when they enable BNPL, especially in electronics.
So, it’s no surprise that FIS Worldpay projects that the global BNPL market will from $60 billion in 2019 to a whopping $166 billion by 2023. That’s an impressive 177% increase in under four years.
Keeping Ahead of the Curve
And one leading fintech pioneer is all over this field…
I’m talking about PayPal Holdings Inc. (PYPL), which launched its BNPL solution last September. Called Pay in 4, Paypal’s system keeps it dirt-simple: for purchases between $30 and $600, consumers can split the payment into four equal parts. The first one is due immediately, and the other three are due every two weeks after that.
All it takes to sign up is a PayPal account, something millions of Americans have, and the system comes without any fees or interest. In fact, applying for it doesn’t even ding your credit history the way taking out a loan would.
As great as this move into the BNPL space is, that’s only one part of what makes PayPal a fintech leader.
The firm is an all-electronic payment processor for e-commerce websites, small businesses, and individuals looking to transfer money quickly and easily without the hassle of checks or money transfers.
It boasts 361 million active accounts, with each account making an average of 40.1 payment transactions in the third quarter of 2020. That adds up to 4 billion payment transactions, for a total volume of $247 billion.
It’s the poster-child for why I expect fintech to be an economy-defining sector in 2021, with huge opportunities to crush the market.
And I’ll be giving that sector special focus, with more of those market-crushing opportunities, coming up in 2021 in my Nova-X Report newsletter.
You can be one of the first people to get access to these recommendations, all you have to do is click here to get started.
Now, when you hear “PayPal,” you may think of the online auction site eBay Inc. (EBAY), which owned PayPal from 2002 to 2014. But after becoming independent again, PayPal has soared.
2020 was a huge year, with the stock surging over 115% as Covid-19 lockdowns made e-commerce and online money transfers the only game in town.
And by introducing its Pay in 4 BNPL system, PayPal is opening up a new growth route.
This could further help the firm by improving its earnings per share. Per-share profits are already growing at 25% a year, which means they will double in just 33 months.
So, from now on, when you hear the phrase “BNPL,” just translate it in your mind to INPL…
That’s my acronym for Invest Now, Profit Later.
Cheers and good investing,
Michael A. Robinson