Buy Now, Pay Later – Vice or Virtue?

This thesis investigates whether Buy Now, Pay Later (BNPL) providers exploit the regulatory arbitrage on the traditional banks in selected European countries. The research approach used is a triangulation study with three vital steps: preliminary consumer credit in Europe market sizing, qualitative benchmark study across three streams: company profile, business operations, regulatory arbitrage, and quantification of the regulatory arbitrage impact model. Findings suggest that BNPL providers exploit regulatory arbitrage on traditional banks in selected European countries, which is estimated to drive up to 13% of total revenues from late consumer fees. Furthermore, regulatory arbitrage worsens the credit loss of the BNPL providers, with an estimated credit loss of 11% as a share of total revenues. This thesis contributes to depicting a detailed mechanism of the regulatory arbitrage exploitation by BNPL players and estimating its impact, which can be used as a blueprint for further research and regulations enhancements.