Dive Brief:

• San Francisco-based buy now-pay later provider Affirm saw an app download surge in the U.S. during the third quarter, giving it more consumer downloads in the U.S. than Swedish market leader Klarna for the first time since the second quarter of 2019, according to Bank of America data. Nonetheless, Klarna still had more than twice as many downloads globally during the quarter, the data showed.
• Klarna also remains the biggest BNPL provider globally based on monthly active users, averaging 8.2 million during the third quarter, followed by Afterpay, with an average of 3.4 million, Jason Kupferberg, equity research analyst for Bank of America Securities, wrote in a Wednesday note to investor clients.
• In the U.S., though, Affirm was the most frequently used, averaging 2.9 million monthly active users during the quarter. Bank of America tracked app downloads and monthly active users among BNPL providers Affirm, Afterpay, Klarna, Sezzle and Zip in the third quarter.

Dive Insight:

Although BNPL app download and active user data remains “robust,” Kupferberg noted growth decelerated in the U.S. and globally in the third quarter. That could present concerns for BNPL companies vying for consumers’ wallet share as the yearend U.S. holiday shopping season nears.

Following surging BNPL popularity, installment providers this year are contending with the potential effects of inflation and economic uncertainty on consumers’ spending and credit health. Those payments companies also are taking a hit from the current e-commerce retreat, as shoppers have returned to physical stores. They also face increased investor and regulatory scrutiny.

Klarna, the oldest of the BNPL providers, was the only provider to see growth decelerate, Kupferberg said. “We suspect the slowdown in Klarna's data could be attributable to a tightening of the credit box, as well as high exposure to European markets, where macro stress was relatively higher than in the US during 3Q,” he wrote.

On the global stage, Klarna’s market share (44.5%) and that of Block-owned Afterpay (22.6%) were dominant as the two most downloaded BNPL apps during the quarter, although Affirm (19.6%) wasn’t far behind. Klarna lost share (falling from 58.5% in Q2) while Afterpay and Affirm gained market share, compared to the second quarter.

This shift was evident in the U.S., too. Klarna made up 27.5% of BNPL app downloads in the third quarter, slipping from 40.6% in Q2 – the provider’s biggest decline since Bank of America began tracking the data in the first quarter of 2018. 

Affirm made up 30% of downloads by U.S. consumers in the quarter, up from 25% in the second quarter; and Afterpay comprised 25%, up from 21% last quarter. In the U.S., Affirm had about two million downloads, compared to Klarna’s 1.9 million during the quarter. Average daily app downloads in the U.S. clocked in at about 74,500 in the third quarter, down slightly from 79,500 in the second quarter of the year, but up 13% year-over-year.

On the monthly active users side, Affirm has been the most frequently used BNPL app in the U.S. for eight consecutive months and saw the largest growth in that measure during the quarter. The company’s gains “came at the expense of Klarna,” Kupferberg wrote. Affirm averaged about 2.9 million monthly active U.S. users in Q3, compared to 2.6 million in Q2, and 1.6 million in the third quarter of 2021.

In the U.S., Afterpay was used second most often, with about 2.5 million active users in the quarter, while Klarna had 2.1 million.

Overall, the five BNPL providers considered in the report, also including Zip and Sezzle, had about 8.7 million monthly active U.S. users, an increase of about 395,000 consumers over the previous quarter. 

Earlier this year, Klarna called the U.S. its fastest-growing market, but most of that provider’s app downloads occurred outside the U.S. during the third quarter. It had about one-quarter of its active users in the U.S. in Q3, Bank of America reported.