There are two key aspects whereby BNPL can pose risks to financial stability: The indirect interconnectedness of the BNPL providers and their dependence on insured deposits. This is especially true given that a significant part of their deposits often comes from a deposit marketplace over which they themselves do not have control. As we have seen particularly clearly in the spring of 2023, deposits may not be a stable source of funding if there is a sudden loss of trust. In addition, the loss of trust can spread quickly to other similar players or banks in general.

The product in itself does not appear to be systemically important for e-commerce payments. Instead, it seems that it could be replaced– at least in the short term. On the other hand, the considerable dependence on BankID is a vulnerability for e-commerce payments as a whole. The Payments Inquiry report presented in spring 2023 also emphasises that it is important that the state produces a state form of electronic identification as an alternative to BankID.^[49] Government Offices, SOU 2023:16: Staten och betalningarna, 31 March 2023.

It is likely that the business model’s profitability will be challenged going forward, with stiffer competition, reduced commerce and rising funding costs. We will therefore probably see this business model put under pressure, as well as some degree of consolidation in the sector, beyond that which has already occurred, which will result in fewer providers in the long term, particularly if global providers choose to enter the Swedish market to a larger degree.^[50] For example, Handelsbanken has chosen to phase out its subsidiary Ecster.

Given that BNPL may pose some risks to financial stability, it is good that the providers offering the product are regulated. It is, however, still important for Swedish supervisory authorities to monitor the growth of BNPL going forward. Such monitoring makes it possible to detect whether the concentration on BNPL is becoming large enough to pose a threat to financial stability. There are also a number of issues related to BNPL that need to be analysed in more detail in the future.

First, there are aspects of how the BNPL providers choose to finance themselves that may need to be further analysed. It is therefore important for Swedish authorities to follow the outcome of the global review of banking regulations following the problems we saw in a number of banks worldwide in the spring of 2023. In addition, work is currently under way on further regulation of BNPL in many countries, and it is essential that Swedish authorities also follow this work and closely study what effects new regulation may have so they can learn from best practice around the world.

Second, it would be desirable to review the design of deposit insurance scheme to better take account of the risks in the business models of different banks, although the possibilities for such a review are to some extent limited at the national level given that it is based on an EU Directive. The fact that lending among BNPL providers is to a large extent covered by the deposit insurance scheme creates security for their customers. On the other hand, it also creates moral hazard in that providers can finance a relatively high level of risk-taking with deposits guaranteed by the deposit insurance scheme.