Buy Now Pay Later Just Got Better – Monzo Flex Takes On Big 3 BNPL Players

The British financial technology company Monzo has launched a new product that plans to take on the growing buy now, pay later (BNPL) market by introducing zero-interest loans on eligible purchases.

Monzo Flex, the name of the new BNPL feature introduced by the company, will allow users to obtain financing on purchases of up to £3,000 either by paying three equally large installments with 0% interest or 6 to 12 installments at a 19% annual percentage rate (APR).

The minimum ticket size for a purchase to be eligible for Monzo Flex would be £30 and it can be applied retroactively to purchases made up to two weeks ago.

“Flex combines Monzo’s technology and banking expertise with its core values, ensuring customers always have visibility and control over their financial lives and only borrow money that they can afford to repay”, stated Kunal Malani, Monzo’s head of borrowing.

Getting approved for a Flex loan is easy. Users just have to complete the application process within the Monzo app. Using artificial intelligence and algorithms, Monzo will be able to make a decision on the application almost instantly.

Once the loan is approved, a credit limit will be set and the user can apply it either fully or partially once a purchase has been made. The first installment of the loan will be deducted upon completing the transaction while the remaining payments will be collected as agreed.

It is important to note that the 19% APR offered by Monzo Flex at the moment is variable, meaning that it can fluctuate alongside interest rates in the United Kingdom.

Monzo Flex – A £38 Billion Opportunity

The introduction of Flex is allowing Monzo to tap on the growing BNPL market. This segment of the lending industry is expected to grow from $5.8 billion (£4.24 billion) in 2020 to as much as $35.3 billion (£25.8 billion) by the end of 2028 according to data from ResearchAndMarkets.com.

That said, Monzo will probably face steep competition from well-established digital payments and fintech companies in the country including PayPal, Klarna, Clearpay, and Laybuy.

According to the firm’s full-year 2020 report, Monzo grew its user base by 23% to 5 million customers by the end of last year. Comparatively, Klarna reported a total of 752,000 monthly active users (MAU) on its iOS app alone.

However, the company experienced a decrease in its gross lending figures last year as the pandemic affected its business although revenues for the company increased from £67 million to £79 million. Of those £23.95 million was interest income for Monzo.

Moving forward, it would be plausible to see the firm’s top-line results being positively affected by the launch of Monzo Flex as this product offering would further diversify the company’s lending activities.

What Could Come Next for Monzo?

There has been a lot of chatter about a potential initial public offering (IPO) of Monzo lately amid the rise of fintech companies and the so-called “challenger banks” in the United Kingdom.

However, the company’s Chief Executive, TS Anil, has clarified that such a step would possibly come to the table by 2023 and not sooner.

Moving forward, there are other opportunities that Monzo could tap on in the rapidly-evolving fintech industry including the offering of cryptocurrency trading services and a crypto wallet.

On that particular front, the company does not appear to be too fond of the Bitcoin (BTC) boom as its general counsel, Stephanie Pagni, deemed the cryptocurrency as a fad despite many of its competitors already having introduced crypto-related services.