The hottest game in town right now is ‘Buy Now, Pay Later’ As consumers flock towards BNPL, significant M&A & fundraising activity this quarter ▪ The COVID-19 pandemic has accelerated the shift away from credit cards with, BNPL taking centre stage as the favoured form of credit, especially amongst younger generations, thanks to platforms’ convenience and ease of use.

For retailers the lure of BNPL is simple: customers spend more, as it increases the average basket size and reduces dropped baskets.

▪ Until recently the BNPL market has been dominated by pioneers such as Klarna (one of Europe’s leading fintechs valued at over $45bn) and AfterPay (an Australian headquartered fintech) recently acquired by Square for $29bn.

▪ Spending via BNPL services is now predicted to reach $995bn in five years1, almost four times the current figure. The fight against BNPL leaders is now on, with significant capital being raised by newcomers. Incumbents are also getting in on the action, with Mastercard tapping into the market with its latest offering, as BNPL threatens to chip away at the dominance of credit cards as the main source of payments.

▪ There has been a hive of M&A activity this quarter, but we believe this is just the beginning with strategics having built up a stockpile of cash to weather the pandemic that they are now looking to deploy: ‒ Goldman Sachs acquired lender Greensky for $2.2bn to attract customers to its Marcus brand of finance products ‒ PayPal acquired Japanese BNPL firm Paidy in a $2.7bn deal ‒ Payments company Square reached a deal to acquire Australian (BNPL) provider Afterpay for $29bn ▪ As big BNPL companies get even bigger, many smaller but fast-growing BNPL companies are raising record sums: ‒ ZestMoney, an India-based BNPL platform raised $50bm led by Australia’s Zip ‒ Scalapay BNPL technology provider raised $155m at a $700m valuation from Tiger Global ‒ Zilch, a UK based BNPL firm, raised $110m led by Goldman Sachs Asset Management & DMG Ventures