Buy vs. Build: EU Banks’ Foray Into BNPL Gathers Steam

At the start of the year, Matt Norton, Santander Bank North America’s head of point of sale lending, told PYMNTS that banks were increasingly eyeing opportunities in the buy now, pay later (BNPL) market.

“Banks have an opportunity to be a major solutions provider in this space,” said Norton, adding that “they’re also no stranger to credit products.”

Read more: Banks Moving Off the Sidelines to Snag Piece of Growing Buy Now, Pay Later Market

Having launched in Germany in 2021, Santander’s own BNPL offering, Zinia, was expanded to customers in the Netherlands in January of this year. Following the digital-first model pioneered by the first generation of buy-button BNPLs, Zinia started offering in-store and online purchases at participating merchants, with Santander stating that offline functionality would be available upon the announcement of a Dutch market launch.

Read also: Santander’s BNPL Product Zinia Expands to the Netherlands

In the months since, Norton’s point has been validated by a number of announcements from some of Europe’s biggest banking players who are increasingly following in Santander’s footsteps by either launching their own BNPL products or snapping up existing players.

For example, Europe’s largest bank by total assets, HSBC, introduced a BNPL payment option to its credit card customers in July.

Instead of fixed-rate interest repayments, HSBC credit card customers now have the additional option to repay in three, six or 12 equal monthly installments. Claiming that the new feature can help consumers pay less interest, the bank also noted that a customer on a typical APR of 21.9% would save nearly 100 pounds ($112) by repaying 1,500 pounds ($1673) on an installment plan, compared to repaying it over the same period otherwise.

Related: Mastercard Installments Adds HSBC, JPMorgan, NatWest, Others as BNPL Partners

Hot on the heels of HSBC, Germany’s Deutsche Bank began piloting its own BNPL solution that same month, leveraging a partnership with Austrian embedded finance company Credi2.

The white-label product is designed as an installment billing tool that will allow merchants to customize their own BNPL payment flows without needing to integrate a third-party provider, thus retaining full control over the lending parameters.

Learn more: Deutsche Bank Partners With Credi2 to Pilot White Label BNPL Product

Penetrating BNPL Space Via M&A

While some European banks have chosen to develop their own BNPL services, others have entered the space via strategic investments in existing providers.

Earlier this month, Compass, the consumer lending arm of Italian banking group Mediobanca, announced that it closed two FinTech deals as part of efforts to cement its presence in the BNPL market.

In the first, Compass acquired Italian BNPL provider Soisy, which provides an installment-based credit solution for eCommerce retailers. Founded in 2017, Soisy has developed agreements with 800 eTailers, has more than 70,000 clients, and lends around 50 million euros to consumers annually, according to a Mediobanca press release.

In the second deal, Compass secured a 19.5% stake in Swiss BNPL FinTech HeidiPay, and will be using HeidiPay’s technology to strengthen its existing installment credit service — PagoLight — for merchants in Italy.

Read more: Mediobanca Doubles Down on BNPL With 2 New Investments

The multipronged investment approach means Compass gains a foothold in both Italy and Switzerland, and it can now leverage customer loyalty from multiple BNPL brands in the region.

In contrast, banks that choose to forge their own path have to market a brand-new product in the increasingly competitive BNPL field, battling it out with digital-first FinTechs.

Ultimately, whether financial institutions choose to build the service in-house or follow the mergers and acquisitions (M&A) path, it appears this is just the beginning for European banks looking to diversify their credit offerings and grab a slice of the growing BNPL pie.

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