The buy now, pay later (BNPL) market, estimated to be worth $120 billion in 2021, has grown significantly over the last few years. But for most of its rise to virtual checkout prominence, BNPL largely targeted everyday consumer goods like clothes from Urban Outfitters or a Peloton. Now, the credit method is moving beyond its e-commerce roots.
In the past few months, large companies have joined the BNPL market, also hoping to quickly approve consumers for installment loans.
Established players like Mastercard and Visa have launched BNPL services through their respective credit cards; Mastercard also estimated that $7.2 trillion of transaction value will occur through BNPL by 2025. Stripe also recently partnered with BNPL heavyweight Affirm to offer payment plans to any business on its platform.
But as multiple large financial service companies look to integrate BNPL into everything, a new fleet of early-stage startups are looking to improve on the strategy and offer tailored versions of BNPL for specific industries ranging from healthcare and childcare to groceries to even charitable donations.
While these services could help consumers access pricey necessities — in the case of medical bills or childcare — is it really a good idea for consumers to start paying off even more in installments?
Kathleen Blum, a vice president of shopper insights at C+R Research, isn’t so sure. The strategy has been proven to persuade consumers to spend beyond their means and has already pushed some users into debt.
“A lot of the people using buy now, pay later, from a demographic standpoint, tend to be a little less financially secure,” Blum told TechCrunch. “There really isn’t a good credit check. Are they really aware? Do they understand the complications with some of that?”
This new fleet of startups, however, makes a compelling argument as to why they shouldn’t be thought of in the same way as the first wave of BNPL startups.
Steven Greene, a co-founder and CEO at Nibble Health, said that for one thing, many are trying to tackle financial purchases that are much more important than, say, buying a pair of jeans. Nibble just raised $8.5 million for its healthcare-focused BNPL service, offered as an employee benefit to help workers pay off medical bills and procedures over time, without interest or fees.
“Our thought was, can we find a better use case for BNPL? Could we allow people to pay for these costs in a better way?” Greene said. “At least a third of patients defer care because they don’t know how to pay for it.”
Roshan Patel thought similarly when he founded Walnut, which also looks to offer BNPL for healthcare but through an embedded finance layer for the medical providers themselves. After a friend broke a bone in a car accident and was forced to pay for treatment via collection agencies, Patel thought there should be a better way to approach these payments.
“Why is it so easy to buy a Peloton over time but you can’t pay for a medical bill over time?” Patel asked. “I think BNPL gets a bad rep in a lot of cases for unnecessarily causing spending. I think in our case it is the opposite; we are helping people stay healthy.”
Blum still isn’t convinced.
“Certainly people do need to have access to the healthcare they need, but there are so many other insurances or government programs that are going to cover what someone needs,” she said. “I think maybe it is too easy. Maybe you do have to jump through some hoops, but you aren’t going to be in debt on top of trying to address whatever health issue you have.”
But these founders say their companies are more rooted in financial planning than just making a snap decision on a large purchase. Siran Cao, a co-founder and CEO at Mirza, a startup looking to bring the model to childcare, adds that startups like hers aren’t out to incentivize people to buy, like many of their consumer counterparts but rather help better afford what they will have to spend anyway or can’t avoid.
“Something that is so different from a traditional retail BNPL, that is accelerating your decisions, is that childcare really is a longer-term cost,” Cao said. “Care now, pay later verbiage is to give that kind of framework because it’s not a one-time purchase.”
Mirza helps families estimate how much they plan to pay yearly in childcare and spaces the payments out in a timeline where they will pay less to start and pay more down the road when they are likely to be making more money and requiring less care, Cao said. She added that the financial planning and education element of Mirza is particularly important to the team as they hope using the startup will help its users achieve better financial health.
These startups may reach a wider demographic of users than BNPL has managed in e-commerce. Nibble and Mirza, which both offer BNPL as an employee benefit, will be able to offer the payment service to employees of all ranks at their underlying customer companies, and both have seen interest from companies spanning industries from tech to manufacturing.
The areas these companies are targeting also tend to be expensive purchases for consumers regardless of their financial status. Similar to Patel, Greene was inspired to start his company from personal experience after his wife had a health emergency and was hit with an unexpected $8,000 medical bill, despite having insurance.
Greene added that Nibble also helps people feel more financially secure before they have to make that future healthcare payment or face an unexpected charge, something that isn’t really a factor in the traditional e-commerce model of BNPL.
“I think we saw so many BNPL companies focused on e-commerce in the first iteration, but the reason it makes sense in other industries — like healthcare, construction or B2B payments — is there are a lot of complexities,” Patel said. “Being able to specialize for that specific industry makes a lot of sense.”
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