The news: Two more banks plan to offer buy now, pay later (BNPL) services as demand for the financing option surges.

• UK-based Revolut has a BNPL offering in early development, per the Evening Standard. CEO Nikolay Storonsky said the neobank is working on a checkout feature that would let customers convert purchases into installments payments using its cards. The BNPL foray will likely be piloted in European markets next year.
• Australia-based Suncorp will launch its “pay later debit card,” according to The New Daily. The card can be used wherever Visa is accepted, and it will cap late fees at $10 per transaction.

How we got here: Revolut and Suncorp join a growing cohort of banks exploring BNPL solutions with hopes to get in the space early.

The Commonwealth Bank of Australia (CBA) just announced a partnership with Klarna to bring BNPL to its vast retail network, and Citibank will launch a BNPL product in Australia in October, as two examples.

The financing solution has long been popular in Australia: 48% of internet users in the country reported using a BNPL service in the past 12 months compared with 28% in the US, per an April 2021 Leger survey. Australia thus tends to act as a testing ground for BNPL providers, signaling what may be next in other markets.

The bigger picture: The consumer-facing BNPL market is getting more intense as providers experience massive growth and look to reshape financial services by becoming super apps. By getting in on the space, banks can capitalize on this growth and fend off competition from BNPL players, which have been creeping into their banking territory.

• There is a massive market opportunity for banks in the space: The number of US BNPL users is projected to reach 45.1 million in 2021 and will catapult to 76.6 million by 2025, according to our forecasts.
• Debit-focused offerings could be particularly appealing to customers because they’re easy to use and they offer a more streamlined payment process than many incumbent BNPL providers that require third-party mobile apps and approval processes.
• Thanks to their strong user bases and acceptance foundation, Revolut and Suncorp’s offerings could take off and take market share away from incumbent BNPL providers in their respective markets. Their success in the space could also further threaten credit cards, which have already taken a hit from BNPL’s growth.

Related content: Eager to read more about Revolut’s BNPL ambitions? Check out what our Banking analysts have to say.