As buy-now pay-later (BNPL) products exploded in popularity during the Covid-19 pandemic, providers of the mostly interest-free instalment loans enjoyed a windfall.
Nick Molnar knows this better than most. At 31, he became Australia’s youngest self-made billionaire after selling Afterpay, known as Clearpay in the UK, to Jack Dorsey’s Block in a $29bn deal.
Three years later, Molnar tells City AM the future is limitless for the BNPL juggernaut he founded with then-neighbour Anthony Eisen in 2014.
“If I look at Clearpay’s opportunity, I don’t think there’s a limit as to where this gets to, because fundamentally we’re providing greater flexibility to a debit card consumer with none of the downstream impacts of a credit card financial model,” Molnar says.
Afterpay boasts some 24m customers and more than 348,000 merchants across five countries. It makes the bulk of its revenue from fees levied on retailers in return for giving customers a checkout option to pay in four interest-free instalments across six weeks.
In August, Molnar was promoted to head of sales at Block – a role he says “means we can look at Block as a portfolio of opportunity for sellers across the world”.
Clearpay’s integration with Block has given it access to a vast network of in-store payment terminals under the Square brand.
Molnar says the UK is now Afterpay’s fastest-growing market, where the firm is looking to expand its offering into new sectors.
“The strategy in the UK is still in the early stages,” he says. “We’re really starting to broaden the vertical suite that accepts Clearpay in the market, and that’s then driving meaningful growth.”
Block’s latest results show Afterpay’s gross merchandise value was $8.24bn in the third quarter, up 23 per cent from a year earlier.
Molnar says Australia, where BNPL has long been a mainstream payment method, is the best case study for how far Clearpay can grow among British retailers.
“We started in the fashion and beauty ecosystem – and now in Australia, you can buy an airline ticket with Afterpay, you can go to the dentist and use Afterpay, or buy your pet supplies,” he says.
“In a given year, our average consumer in Australia buys from 11 different verticals – and we’ve been live in Australia almost 10 years. So it gives you perspective as to where the UK will get to – and there’s zero structural differences between the UK and the Australian market.”
He highlights home, travel, pets and live entertainment as some of Britain’s most promising sectors for BNPL, many of which overlap with Square’s network.
BNPL boom
BNPL’s rise came as millions of Britons turned to online shopping and alternatives to credit cards amid cost-of-living pressures.
However, these borrowers do not have access to some protections guaranteed with other consumer credit products, and BNPL providers are not required to conduct credit checks.
The new government last month unveiled plans to bring British BNPL providers under the supervision of the Financial Conduct Authority in 2026, following concerns that shoppers are at risk of unknowingly falling into debt.
Nearly a quarter of BNPL users were charged late repayment fees last year, according to charity the Centre for Financial Capability.
“We disable someone’s account the moment they’re late on one instalment – there’s no credit card that does that in the world, because the business economics don’t work,” Molnar says.
“And the customer affinity and love for the product as a function of the fact that we disable their account when they’re late on one payment is really powerful.”
Clearpay, which conducts “soft” credit checks, claims 95 per cent of its transactions are paid on time and that only two per cent incur a late fee.
Molnar acknowledges that cost of living pressures and high interest rates “lead to strong undercurrents in our business as a function of access to capital, and not just access to liquidity, but the best quality of liquidity that they could lean on at this time”.
Still, he is bullish on the resilience of Clearpay’s customer base. “Yes, there are pressures from an economic position in the market, but we’re seeing some of the best repayment behaviours that we’ve ever seen in our company’s history,” he says.
Molnar argues regulation must “prioritise customer protection, allow for innovation in consumer credit and set high industry standards”.
“I’m encouraged that HM Treasury has listened to industry feedback on BNPL regulation and evolved the previous framework to ensure a more proportionate approach,” he adds.
Rising competition
With Adobe projecting £3.4bn in total British online BNPL spending this holiday season, a pack of providers are jostling for a slice of the market.
Recent years have seen big banks like Natwest and HSBC move into the space, while US giant Affirm announced earlier this month that it was launching in the UK to challenge the likes of Klarna, Clearpay and Zilch.
But the mixture of intense competition, a tighter fintech funding environment and the spectre of regulation is considered a risk to some players.
City AM revealed earlier this year that Laybuy, once one of the UK’s biggest BNPL names, was putting itself up for sale. Its assets were later snapped up by Klarna.
“I think you’re seeing globally the industry be created, and there are naturally a couple of key players in that market – and it’s more challenging for the smaller providers,” Molnar says.
He adds that while all of Afterpay’s markets are competitive, there is room for a number of big players to co-exist.
“You are seeing people offer multiple BNPL products at checkout, because we have way less customer overlap than you would anticipate,” he continues.
BNPL bosses have argued it is the smaller providers that will struggle the most to adapt to regulation, particularly those which have come to rely on late fees for a major chunk of their revenue.
“I think the term BNPL is very broad and encompasses a lot of different products that aren’t necessarily all consistent with what Clearpay represents,” Molnar says.
The Treasury’s consultation into BNPL regulation will close later this month. The government plans to introduce legislation early next year.