Buy Now Pay Later (BNPL): Unleashing the growth opportunity in the Asia Pacific

The Buy Now Pay Later market can own 10% of the total payments market share in the Asia Pacific (APAC) by 2025. With e-commerce growth, the shift in consumer mindset, and heightened digital skill, the digital payments market experienced an unprecedented evolution. Asian consumer values are changing from traditional credit options to alternate lending, bringing in the flexibility of interest-free borrowing and enabling easy budgeting. BNPL as a lending product allows short-term, instant, interest-free installments to the consumer without bearing the brunt of paying the full value upfront.

As a result, the Buy Now Pay Later market is witnessing a meteoric rise from 2018, where users of the financing method have grown by 600% to date spending USD 32.9 billion (2021) in online transactions. This amount is equivalent to ~3% of the APAC e-commerce payment market share (2021). BNPL will continue this multi-fold growth as the e-commerce industry is set to reach sales of USD 4 trillion by 2025E.

Figure 1: ~60% CAGR between 2022 -2025
Buy Now Pay Later volume of transactions

Asia Pacific countries taking a leapfrog in BNPL adoption

In the last 2.5 years, home-bound consumers have accelerated the phenomenal digital payment innovation and adoption of BNPL, one that could have taken 5-7 years to become mainstream. An 80% internet penetration and a strong dependence on e-commerce fuel the significant progress of Buy Now Pay Later, valuing the e-commerce market at USD 1.2 trillion in 2021. Therefore, making BNPL a preferred transaction choice among customers, enabling them to manage expenses through deferred payments while fulfilling the desired purchases.

Figure 2: Making purchases with Buy Now Pay Later is the new way of retail consumption
Buy Now Pay Later country-wise penetration

Australia is the frontrunner in adoption, with BNPL accounting for 10% market share in online transactions and 1.3% in point-of-sale (POS) financing. The bullish growth in the Australian market stems from the regulatory environment and consumer trust in interest-free credit solutions. At the same time, China’s spend volume in both POS financing and online BNPL transactions is the highest in the region, crossing nearly USD 69 billion in 2021.

With BNPL in Indonesia, Vietnam, and Malaysia owning an average market share of 2% in e-commerce transactions, we also see the emergence of a robust growth cycle. Furthermore, Buy Now Pay Later is capable of crossing over 5% by the end of 2023 with non-metros joining the digital consumer base.

In the past, matured economies such as Japan, Singapore, and India were inclined towards credit cards to conduct transactions. Still, they show a strong headwind for BNPL with 3% and nearly 1% market share in e-commerce and POS transactions, respectively, with market-dominant players such as Grab, Gojek, Simpl and LazyPay embedding BNPL seamlessly in consumers’ everyday life.

Driving continued success with a connected ecosystem

Set to become a USD 1 trillion GMV by the end of this decade, the Asia Pacific region is pushing the banks, fintechs, merchants to serve its customers’ rising expectations in new and innovative ways. The desired economic value is now achieved through distinct, immersive, and personalized experiences for customers. Banks, fintech, and merchants will thrive on this opportunity by measuring acquisition and consumption across platforms through connected ecosystem value.

End Notes

Buy Now Pay Later & ePOS Credit Spend to Exceed $760 Billion in 2025

Worldpay from FIS, The Global Payments Report 2021

e-economy SEA 2021, Google

Buy now and pay later all set to disrupt e-commerce payments in APAC