PNBL or BNPL?

My friend Ron Shevlin was putting some shade on Starbucks app this week. The reason is that some claim Starbucks is a bank because their prepaid app is so popular. Ron claims it is just PNBL – Pay Now, Buy Later – and is nothing to do with being a bank. The thing about his view that piqued my interest is the PNBL v BNPL debate.

Tjere are many examples of PNBL, such as paying utility bills by direct debits or buying tickets for a concert in the future. The whole idea is that you gather deposits for future events and earn interest on those deposits. Many companies operate this way – think of holding balances on any accounts that earn zero interest – and is a great way to generate income.

But the question should surely be: why would I pay now to buy later versus buy now and pay later? Good question. Answer: Convenience.

Starbucks holds around $2 billion in deposits so that people can get their latte without a party. As Rafael del Castillo Ferreira notes: “At the heart of the Starbucks app is a simple mechanic: load money onto your account, earn stars, and redeem them for free drinks.”

In other words, just as with many other loyalty schemes, you prepay for rewards … if you ever use them. It makes me wonder how many utility firms have prepaid bills by people who then moved; how many gaming firms have accounts no longer used with balances on them; how many ariline companies have frequent flier accounts where the flier is no longer with us; how many pension companies have pensions that were never claimed … the list goes on and on.

And Ron is right: none of these are banks. They are just prepaid accounts. The issue with such accounts is the one just mentioned: does the owner of such accounts ever claim or use them?

Of course some do, but there are billions who don’t. By way of example, the number of lost pension pots in the UK has doubled to around 3.3 million in the last six years, worth over £30 billion. £30 billion in wasted cash! And that’s just pension pots. The total value of unclaimed bank account balances is estimated to be around £4.5 billion in the UK, and others estimate that the total bill for lost assets including pensions and investments go much higher, at up to £82 billion. Multiply that for all countries and you are probably looking at $1 trillion in lost balances worldwide.

In that context, a prepaid wallet for a coffee at Starbucks seems minimal and, once again as Ron says, Starbucks is not a bank. It’s just a prepaid wallet for a coffee. It may be worth $2 billion, which is a lot of coffee, but it is balances for cappuccinos and not a casino. Leave that to the banks.