Is Retail-FinTech Convergence the Next Big Opportunity for Private Equity?

Retail and FinTech are converging at a speed few anticipated. Consumers now expect seamless payments, flexible credit, and integrated digital wallets while shopping. Retailers, in turn, are looking for loyalty, data-driven insights, and new revenue streams. This intersection is reshaping the future of commerce through Buy Now, Pay Later (BNPL), digital wallets, and private equity investment.  

This convergence is driven by evolving consumer expectations and the rapid adoption of new technologies. Shoppers demand flexibility, transparency, and frictionless experiences, while retailers and FinTechs aim to integrate services, capture data, and foster ongoing engagement. As these models intertwine, new opportunities arise for investors to back platforms offering convenience, scale, and sustainable revenue. 

A Market in Motion  

Payments have evolved beyond simple transfers; they now serve as valuable data touchpoints. Retailers view payments as tools for loyalty, upselling, and building direct relationships.  

McKinsey's 2024 Global Payments report estimates the industry processed US$1.8 quadrillion across 3.4 trillion transactions in 2023, with revenues projected to grow 5% annually and add nearly US$700 billion by 2028. 

• 80% of BNPL users begin shopping on BNPL provider platforms rather than merchant sites.  

  
  

• 40% of BNPL usage displaces credit cards, while 29% displaces debit or cash. 

• 12% of BNPL purchases would not have occurred without this option.  

  
  

• Additionally, McKinsey indicates that point-of-sale financing has increased from approximately 7% of U.S. unsecured lending balances in 2019 to 13–15% by 2023.  

These insights underscore a key reality: payments are becoming central to retail growth and FinTech innovation.  

BNPL as a Retail Growth Engine  

BNPL has moved beyond its initial niche and is now a mainstream retail lever.  

• Klarna, a Swedish FinTech company, partners with Walmart to provide instalment loans through OnePay, Walmart's digital payments app, offering BNPL services online and in-store. Klarna also integrates shopping, payments, and discovery within a single platform, primarily as a BNPL and digital payments provider. 

• In India, ZestMoney has expanded access to credit in a market with low credit card penetration. 

  
  

BNPL boosts average order value, enhances conversion rates, and offers flexible credit for consumers. Investors are drawn to transaction data, proprietary underwriting models, and merchant partnerships. 

Challenges include regulatory scrutiny and credit risk, with markets like the U.K. requiring PE firms to assess sustainable unit economics and risk management. 

Digital Wallets and Super Apps  

Digital wallets are central to retail ecosystems, serving as payment gateways, loyalty programs, and engagement hubs. 

• Apple Pay and Google Pay dominate Western markets by embedding payments into mobile devices and operating systems. Apple primarily develops consumer electronics, while Google excels in digital services.  

• In Asia, Alipay and WeChat Pay extend beyond payments, integrating shopping, investing, travel, and credit. Their parent companies, Alibaba and Tencent, are diversified technology and e-commerce giants.  

Benefits:  

• Retailers: Reduced checkout friction, higher mobile sales.

  
  

• FinTechs: Embedded financial services, higher engagement.

  
  

• Investors: Network effects create stickiness; once consumers link cards, loyalty points, and data, switching is difficult. 

  
  

The investment question is not whether wallets will grow, but which ecosystems will dominate across different regions.  

Where BNPL Meets Wallets  

The most significant convergence occurs at this intersection. BNPL providers are embedding themselves into wallets, while wallets are introducing BNPL-like features.  

• Klarna integrates with Apple Pay.

• PayPal, initially a wallet, has expanded into BNPL. 

  
  

• GrabPay and GoPay, based in Southeast Asia, combine payments, mobility, shopping, and credit.  

This convergence creates cohesive ecosystems. Consumers enjoy seamless experiences, retailers benefit from higher sales conversions, and FinTechs secure ongoing engagement.  

For private equity investors, platforms combining these elements command premium valuations, as convergence diversifies revenue streams and enhances model resilience. 

Why Private Equity is Watching Closely  

Private equity firms have long targeted payments for their stable cash flows and scalability. The convergence of BNPL and wallets introduces new growth opportunities.  

Potential areas include:  

• Consolidation: Acquiring smaller BNPL or wallet firms and merging them into larger platforms.  

  
  

• Geographic expansion: Supporting regional champions positioned for cross-border scaling.  

  
  

• Vertical integration: Investing in FinTechs that merge payments, lending, and loyalty.  

  
  

• Data monetisation: Leveraging transaction data for credit scoring, personalisation, and partnerships.  

Recent deals illustrate this momentum. Silver Lake and GIC invested in Klarna following its valuation reset, betting on its ability to scale its ecosystem. Advent International backed Planet, a payments provider, to expand into integrated retail and hospitality services.  

AgileIntel research indicates that private equity firms now favour embedded, multi-product platforms that are better equipped to withstand regulation and competition than single-product providers.  

Practical Considerations for Investors  

When assessing opportunities, private equity firms should consider:  

• Are unit economics sustainable? Margins must remain robust after accounting for credit losses and subsidies.  

• What is the regulatory exposure? Consumer credit rules and data privacy laws may necessitate strategic adjustments.  

• How strong are retail partnerships? Merchant retention is vital for long-term growth.  

• Can the platform scale? Technology must accommodate new features without extensive restructuring.  

• What are the exit pathways? Options may include IPOs, strategic buyers, or secondary private equity rounds.  

Looking Ahead  

The convergence of BNPL, wallets, and retail FinTech is redefining consumer payments. Retailers demand data-rich, embedded solutions. Consumers seek flexible, transparent experiences. Investors target scalable platforms with diverse revenue streams.

For private equity firms, the timing is opportune. The successful players will balance growth with regulatory compliance and innovation with profitability.  

At AgileIntel, the convergence of retail FinTech will shape consumer finance's next wave of value creation. The challenge lies in identifying which models can scale sustainably in an increasingly competitive market.