Five ways ‘buy now, pay later’ will change in 2022

This story is part of Protocol's special report, "Buy now. Pay later. Win the future." Read more here .

Fulfilling global ambitions

Affirm, Klarna and Afterpay started continents apart and focused on their local markets. Now all three have world-striding ambitions. Affirm said at a September investor presentation it was planning to expand abroad — a necessary move, after Klarna and Afterpay's incursions into the American market. After buying Quadpay, Zip now operates on five continents, and PayPal's cross-Pacific deal for Paidy is more evidence of the global push. "Buy now, pay later" has near-universal appeal for consumers, making borders less relevant than in other fintech sectors. The one exception to this rule may be expanding online installment plans into physical retail settings, which will require savvy local deal-making and awareness of the cultural nuances of in-store selling.

Delivering on the payments-rails promise

As a16z partner Alex Rampell pointed out in a Twitter thread, the real potential for "buy now, pay later" isn't just consumer convenience: It's building a parallel payments system that could drain volume away from Visa and Mastercard. Already, pay-later logos seem almost as ubiquitous on checkout pages as card-network stickers are on store windows. Expect "buy now, pay later" companies to aggressively court consumers with initial offers to get them signed up, then persuade them to download apps and make repeat purchases. One flashpoint may be the virtual cards they offer to pay for goods at merchants that haven't signed deals yet. Those ride on Mastercard and Visa's rails, but ultimately feed the upstarts data about the most popular retailers to steal away from the big networks. Apple's reported interest in the market also suggests how digital wallets combined with "buy now, pay later" could bypass the card networks.

Curing the inevitable 'buy now, pay later' hangover

Cleaning up after "buy now, pay later" will be its own business. Collections, chargebacks, refunds and fraud-fighting will be big auxiliary businesses that grow in the wake of "buy now, pay later's" expansion. Affirm's acquisition of Returnly and Klarna's ecommerce-app shopping spree are examples of how big pay-later firms could take advantage of these adjacent opportunities, while the rise of TrueAccord as the sector's go-to debt collector shows how valuable standalone firms will emerge, too.

Pursuing the business-to-business opportunity

The business world is already awash with invoices stamped "net 30." But for smaller firms in particular, the consumerization of accounts payable holds promise. Look for more companies to mimic the style of retail "buy now, pay later" offers with a variety of payment options. Affirm spun out the business-focused startup Resolve, which raised $60 million in May, and Splitit is an example of a company that's expanding from consumer to B2B installments.

Watching the coming regulatory wave

Britain and Australia have been moving faster with "buy now, pay later" rules than the U.S., and the U.K.'s Financial Conduct Authority's oversight of ostensibly "interest-free" transactions may be instructive for regulators elsewhere. (California has also been moving to rein in unlicensed lenders.) A key question to consider: "Buy now, pay later" firms tell consumers they don't have to pay interest — at the same time that they tell merchants the deals can help them avoid having to discount. If "pay later" customers end up paying more than "pay now" customers, especially as short-term credit offers are marketed to more financially strapped consumers, is that a form of price discrimination — and is the interest charge just getting disguised? These are tricky issues to consider. The Consumer Financial Protection Bureau issued some warnings about "buy now, pay later" in July, including the fact that paying off the purchases doesn't help build credit scores — signaling another area of regulatory interest.