Believe it or not, the hottest hypergrowth industry in the world right now is one that not many folks on Wall Street are chatting about, and that’s the Buy Now, Pay Later market.
Buy Now, Pay Later – or BNPL – is a relatively new type of digital fintech product that allows folks to buy a product today, and pay for it through regularly scheduled installments in the future.
It’s basically a credit card, except BNPL services normally don’t charge interest, because BNPL service providers don’t make their money off those interest payments – rather, they make their money through a commission fee on the initial transaction.
And, in a nutshell, that’s the bull thesis on the BNPL market: These products are going to eventually replace your credit card.
At the current rate, BNPL bulls have the numbers working in their favor. In 2019, U.S. payment volume through BNPL services measured just $3 billion.
In 2020, that number soared to $39 BILLION…
Yep. You read that right. BNPL payment volume in the U.S. surged 13X in just 12 months. Yet, even after that torrid, BNPL transactions still accounted for just 2.1% of e-commerce transactions worldwide in 2020.
There’s a lot of white space for this market to keep growing like wildfire over the next few years. But will it?
Big Tech and retail companies think so.
Square just acquired BNPL service provider Afterpay and intends to integrate BNPL functionality across its suite of merchant solutions, including its payment card processors.
In response, Square rival PayPal acquired its own BNPL service provider, Paidy, in a $2.7 billion, mostly cash deal.
Then there’s Mastercard, who – in response to Square and PayPal – is launching its own BNPL service, dubbed Mastercard Installments, in the U.S., Australia, and the U.K.
Meanwhile, Amazon just partnered with BNPL service giant Affirm to allow customers to break up purchases of $50 or more into smaller installments. It’s the first partnership Amazon has ever made with any installment player of any kind.
Walmart is replacing its layaway service for a BNPL program through Affirm. Macy’s has embraced BNPL services. So does Bed Bath & Beyond. Same with Nike, Best Buy, and Sephora.
BNPL is sweeping across the retail and technology worlds. And it’s really no wonder why. An independent study conducted by web analytics firm SimilarWeb of the top 50 online merchants that offer BNPL options and the top 50 that do not, found that those that offer BNPL options have a ~50% higher conversion rate.
In other words, BNPL options are better for buyers (no interest) and sellers (higher conversion rates). It’s a true win-win solution – and win-win solutions tend to dominate markets.
BNPL will be no exception to this rule.
Will BNPL completely replace your credit card? Probably not anytime soon. Credit cards have established banks behind them, with cool rewards programs, and attached saving and checking accounts.
But will BNPL steal significant market share from your credit card? Absolutely. As stated earlier, this highly efficient payment option accounts for just 2.1% of all e-commerce sales globally. That number could easily march toward 50% by 2030.
So… you’re talking about a market that could grow 25X over the next decade…
You won’t find too many markets in the world like that today. And that’s why this is an industry that all long-term investors should have exposure to in the 2020s.
To gain that exposure, let me point you to my ultra-exclusive research advisory service, The Daily 10X Stock Report, which is dedicated to picking one explosive, hypergrowth stock pick, every single the day stock market is open, with the potential to soar 10X in value.
I started this service just over a year ago – and in that short time, I’ve already scored my readers nearly 100 triple-digit winners and six different stocks that have soared 10X or more in value.
Right now, my team and I are scouring the market for the best small-cap BNPL investment opportunities, as we believe a high-quality, asymmetric investment in that space could turn into our next 10X winner.
Click here to find out more.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.