Fractional payment fintechs have eaten their fill. After two years of euphoria, in 2020 and 2021, they are facing rising interest rates, following inflation, and an increase in the risk of non-payment. They will have to comply with new rules which the regulatory authorities, particularly in Brussels, are preparing to curb over-indebtedness. At the same time, they will have to defend their prerogative against the giant Apple, which has launched an Apple Pay Later solution.
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Once boosted by low cost of money, the explosion of e-commerce during the Covid-19 pandemic and the habit of young people to pay on their smartphones by instalments, the pure-players of fractional payments have now had their heyday. Their offer is attractive: it allows consumers to pay for purchases in instalments (over a period of several weeks or months) and generally without interest. These companies then charge e-commerce sites and retailers a fee for each transaction. In 2021, there were about a hundred players in the world on this booming market. The world leaders are Sweden’s Klarna, Australia’s Afterpay and the United States’ Affirm, according to ResearchAndMarkets.com.
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