Financial stability is defined as a financial system that is stable and efficient, which also includes the ability of the public to make payments. To evaluate the potential risks of BNPL, we need to understand what BNPL itself means for e-commerce payments and how the providers and their business model affect the financial system as a whole. To evaluate these aspects in a more systematic way, we divide our analysis into three parts.

Figure 6. Framework for analysing risks to financial stability

1. Risks associated with the payment product and checkout solution: Part of financial stability concerns the ability of the public to make payments. Given that e-commerce accounts for around 17 per cent of retail turnover, it is therefore relevant to find out whether BNPL as a product and the checkout solution offered by BNPL providers are systemically important for e-commerce payments in Sweden. We also need to know how quickly we can switch to alternative solutions should problems variously arise.
2. Business model risks: A stable and efficient financial system depends on business models that are profitable over time. A single player with a problematic business model can be replaced but, if the business model of a particular product offered by several players is problematic, it can affect the entire financial system. It is therefore relevant for the Riksbank to find out what the profitability potential of BNPL is and what the main risks of the business model are.
3. Risks to the financial system as a whole: Problems in one part of the financial system can spread to other parts of the system if players are highly interconnected. Contagion can also spread beyond the sector. This makes it relevant to find out how closely interconnected the BNPL providers are. For example, what happens to the other providers if one of them loses the trust of their investors or customers?

To understand the threats BNPL may pose to financial stability, both the BNPL providers themselves and a number of other operators involved in payments in e-commerce in various ways have been interviewed. These include e-commerce platforms, trade organisations and online retailers. The interviews were conducted between February and May 2023.