Even A Dreaded “Down Round” Can’t Stop the Buy Now, Pay Later Machine


With every passing checkout charge, the Buy Now, Pay Later (BNPL) market seems to be simultaneously imploding and becoming more competitive. On Thursday, the Wall Street Journal broke the news that Klarna—the Sweden-based global leader in firms that specialize in BNPL—“is seeking to raise new funds that could value the fintech giant at almost a third less than the roughly $46 billion valuation it achieved just under a year ago.” The Journal was charitable in its interpretation; after all, “down rounds,” or fundraising cycles in which companies raise new capital at a lower valuation than a previous round, are something of a startup nightmare, a signal that something has gone wrong. A down round need not be fatal: Square and Draft Kings both pushed through down rounds, and given recent market tumult, down rounds are likely to become more common.

Still, it’s impossible to avoid the conclusion that investors don’t see BNPL as the Shangri-La of even a few months ago. Here is another input: two months ago, FIN noted that the market capitalization of Affirm, the US leader in BNPL, “dipped below $10 billion for the first time since going public in January 2021.” Today it is just above $7 billion.

Some investor jitters are due to a stampede into the market. This week, Square announced that has integrated its purchase of BNPL provider Afterpay; it can now be offered by millions of in-person sellers in the US and Australia.

In addition, there continue to be disturbing reports about what BNPL actually looks like in the wild. A Credit Karma survey in March found that 22% of BNPL customers use high-interest credit cards to make their BNPL payments. A recent article on SFGate detailed the seamless integration of BNPL on TikTok and Instagram, which is clearly leading many teens to spend money they don’t have.

And yet, there seems to be no stopping the expansion. A Dutch BNPL firm this week announced an $83.5 million fundraising round, and claimed 300% annual growth. This week the UK BNPL provider Zilch announced that it is expanding its business to the US market, basing its operations out of Miami. Zilch cofounder and CEO Philip Belamant told FIN that his company has extensively researched the US market, and that Zilch will stand out by offering customers “the best of both worlds”—the rewards of a credit card without the interest rates or fees. The company claims to have 150,000 US customers pre-registered. Maybe that sounds like a lot, but keep in mind that Germany’s N26 neobank once claimed 500,000 customers in the US, and still had to close up shop.



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