The Outlook For BNPL Across Asia Pacific

BNPL or "Buy Now, Pay Later" is a method of financing that allows you to split your purchases into individual installments. So that way, you can purchase an item(s) even if you don't have the cash for it — and this is one of the reasons why BNPL schemes are so popular.

The outlook for BNPL across Asia Pacific-01

We've also seen how e-wallets in the Asia Pacific region have begun offering their own BNPL schemes. For example, Grab has PayLater, Fave brings us FavePay Later, and Indonesia has PayLater by Gojek.

While not creatively named, these financial services are slowly but steadily making their presence felt across the region. Plus, with Asia's significant unbanked population, BNPL allows consumers to bypass the restrictions typically put up by credit cards.

So, let's now look at some of the factors behind BNPL's strong growth in recent years.

Table of Contents


Factors Behind The Rise Of BNPL
1. Convenience

One of the most significant advantages of BNPL is its convenience. Unlike a credit card, signing up for a BNPL scheme doesn't require customers to jump through hoops. Instead, they are only required to pass a soft credit check to be eligible for the scheme.

Applicants are also not required to sign up for a bank account or submit financial documents. In fact, customers do not even need to leave the comfort of home to sign up for a BNPL plan as everything can be done online.

2. Structured Payments

When appropriately used, BNPL lets consumers stretch their money further. That's because they can split their purchase into interest-free payments over a certain period of time.

And unlike credit cards, BNPL schemes do not allow customers to make minimum payments. Thus, ensuring that customers remain disciplined in their payments to avoid racking up expensive late fees and interest charges.

3. Low credit card penetration in Southeast Asia

Despite its dynamic economy, significant numbers of residents in Southeast Asia still lack access to basic banking services, which is why it should come as no surprise to see why credit card penetration in the region remains low.

But the widespread availability of mobile phones and internet access has changed everything. As customers can apply for BNPL schemes online, they are no longer constrained by the lack of access to banks or financial institutions.

4. Increased availability of e-wallets

COVID has accelerated both the uptake of cashless payments and encouraged the widespread adoption of e-wallets. These applications allow users to send/receive/make payments with their mobile devices. All of this is especially useful given how consumers have begun shifting towards going cashless.

Besides facilitating payments, e-wallets have also begun offering various financial services, including BNPL schemes. And because of this, even traditionally unbanked and isolated communities have the opportunity to make use of BNPL for their purchases.

5. The rise of e-commerce

Given the city's proximity to China, it should be no surprise that Alipay is Hong Kong's most used e-wallet. According to a survey conducted in 2020, about 67% of Hong Kong's residents use Alipay for most of their purchases.

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Predictions For The Future of BNPL

Now that we have a better understanding of what drives BNPL adoption let's look at some future predictions.

1. Increased market penetration

The BNPL market was valued at around $5 billion as of 2021. Given the high rates of uptake by a new generation of shoppers and a desire for increased flexibility, it's safe to say that BNPL schemes will likely grow exponentially in the years to come.

Furthermore, with a recession looming, consumers will be forced to rethink their spending habits. And this will likely encourage even more customers to turn to BNPL for their purchases.


2. Government regulation on the rise

Despite the sunny outlook for BNPL, governments and consumer groups are still wary of the risks posed by such schemes. For one, the easy access to microfinancing could result in uncontrolled spending and the accumulation of large amounts of debt.

Secondly, there's the fact that BNPL companies are not subject to the same stringent regulations as financial institutions. Thus, we can probably expect increased pressure and oversight from governments in the coming days.


3. Synergy amongst companies

A consolidation or synergy amongst companies is another thing we can expect to see in the near future. The BNPL market is crowded with dozens of players, but eventually, all of this will hit critical mass.

When that happens, we can expect to see a shift in strategy with businesses merging with one another. And what's left will be a group of major players and perhaps a handful of more niche companies, similar to what we've seen in the super app sector.

XanPay: Linking BNPL With Your Business

As customers make the shift towards BNPL, merchants will also have to pivot their offerings to support increased demand. But with so many different e-wallets and payment schemes available, is it actually possible to do so realistically?

The answer is a solid yes.

With XanPay, we offer a one-size-fits-all solution for your payment needs. Our platform caters to the most popular alternative payment methods available in Asia Pacific. From Malaysia's DuitNow to Indonesia's GoPay, you can count on XanPay to bridge the gap between you and your customers.

Besides that, we give you the opportunity to get ahead of your competitors by offering:The outlook for BNPL across Asia Pacific-02

For more information on XanPay and how we can help you get aboard the BNPL train, check out our website.

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