As the demand for online shopping continues to increase, a consumer hurricane of "buy now, pay later" has swept through Southeast Asia.
Buy now, pay later(Buy Now Pay Later, abbreviated as BNPL).It is an emerging consumer finance modelIt allows consumers to enjoy the goods or services first and then repay them in installments without paying interest or handling fees. This model is rapidly gaining popularity across the globe, especially in Southeast Asia.
Southeast Asian tech giant Grab's in-depth research report on the development of buy now, pay later (BNPL) services in Southeast Asia has shown strong growth in the past few years. In 2020, the total value of goods purchased by Southeast Asian consumers on e-commerce platforms through BNPL services reached US$900 million, and this figure is expected to grow nearly nine-fold by 2025billion dollars.
BNPL is growing strongly in Southeast Asia Source: Grab).
In this article, you will be able to read:
1.The popularity of BNPL in Southeast Asia and why.
2.Take a closer look at the BNPL payment process.
3.Is the BNPL model a smart choice for you?
Why is buy now, pay later so popular in Southeast Asia?
Objectively speaking, the reason why buy now, pay later can be recognized by more Southeast Asian consumers and gradually become a newer payment model, combined with the overall environment, is also caused by a number of reasons.
Increased internet penetration
In terms of population size, Southeast Asia is a dynamic emerging market with a younger population and a population of about the same6.800 million, of which the number of netizens is exceeded400 millionIt has the largest group of netizens in the world.
According to eMarketer, by 2023, nearly 90% of Southeast Asian internet users will be smartphone users, which is higher than that of economically developed regions such as North America and Western Europe.
02. The e-commerce industry is expanding rapidly
According to a report released by eMarketer, in 2023, the growth rate of Southeast Asia's e-commerce market will rank first in the worldSoutheast Asia has been the fastest growing region in the world in terms of e-commerce scale for three consecutive years. At the same time, in recent years, Amazon, TikTok, Shopee and many other e-commerce giants that have been deeply involved in the Southeast Asian market have begun to actively deploy and introduce "buy now, pay later" services.
03. Consumers are familiar with digital technology but lack financial services
The low penetration of credit cards in the Southeast Asian market and the high rate of the unbanked population are helping to drive the use of BNPL.
Despite the widespread availability of mobile phones and the Internet, financial services for consumers in the region are still inadequate. For example, Southeast Asia has 6700 million consumers, but only 27% have bank accounts, and local consumers in Southeast Asia are very sensitiveBNPL provides them with the "best of both worlds" solution, reducing sensitivity and increasing credit without being burdened by the cost and long-term commitment of credit card requirements.
04. Bulk purchasing culture
In Southeast Asia, bulk sales are very popular. From nail salons to air conditioner repairs, merchants prefer to sell ** or ** services rather than disposable products. Compared with traditional bulk purchases, POS machines or credit cards are used to pay. Buy now, pay later provides convenience to consumers and their partner merchants by minimizing the initial purchase cost.
Obviously, these drivers provide a good basis for the development of BNPL as a payment method.
Buy now, pay later payment process
Buy Now, Pay Later (BNPL) as a payment service, its main features and operation process are as follows:
Tie a card to grant creditMost BNPL companies have their own APP official website, and users need to complete the card registration and credit granting process on the APP or ** before payment.
Tie card:BNPL payment methods are usuallyDebit cards and some credit cards are acceptedCommon brands include Visa and Mastercard, and some service providers also support local UnionPay cards. Verification may be required when binding a card, usually via SMS.
Credit:In order to confirm the creditworthiness and repayment ability of users, BNPL companies usually require:Provide a unique local identification (e.g., ID card).and conduct rapid risk verification through the internal risk control system or the third-party credit information system or risk control data system in the local market.
Place an order to payThe main scenarios for using BNPL services to purchase goods:
Browse the merchant's products through the official BNPL platform and select the BNPL payment method to complete the payment
After placing an order on the independent station of the merchant platform, select the BNPL payment method at the cashier, and jump to the BNPL APP to complete the payment
When you go to the store, you can use the registered BNPL payment app to scan the QR code to pay.
In order to ensure the security of the payment, the user may be required to provide personal information for identity verification. This can include name, address, **number, etc. After confirming your identity, you will be asked to choose an installment payment plan. BNPL usually offers different installment options such as 3, 6, or 12 installments, among others.
RepaymentThere are usually two ways to repay the loan: a BNPL companyAutomatic withholding and user-initiated repayment。One week before the expiration date, the BNPL company will remind users through SMS or APP that there is no handling fee for on-time repayment or early repayment. Most BNPL companies have a back-office transaction type of consumption, and each installment of repayment corresponds to a consumer transaction. A small number of companies use the pre-authorized transaction type, which is suitable for buy now, pay later operations with a credit card.
In order to increase users' willingness to repay and achieve profitability, many BNPL companies have started charging late fees in case of overdue. Late fees will vary depending on the BNPL company and market.
Is the BNPL model a smart choice for you?
The buy now, pay later model is undoubtedly a disruptive payment method, providing a new payment channel that allows consumers to shop and spend as much as they want. But that's not necessarily a good thing.
The risks associated with buy now, pay later should not be overlooked. According to a recent report by Credit Karma, 34% of consumers missed the repayment time when using BNPL, and 75% of them believe that this directly caused their credit to be damagedThis affects the ability to borrow.
Merchants should make careful decisions when facing the BNPL wave, especially when it comes to payment options, and you need to look at the pros and cons of the BNPL model from multiple perspectives. That means, you need:Around fees, integrations, user experience (UX), authentication and customer ownership, accountability, and bad debt managementand so on,Communicate honestly and adequately with the BNPL service provider, as well as your internal team.
Finally, for merchants to choose buy now, pay later products, photonpay put forward the following three suggestions:
Choose a hybrid and targeted mature payment method for your target market, and avoid relying on one payment method alone.
Choose a relatively stable payment partner in the changing buy now, pay later market to improve the ability to resist risks.
Choose the market carefully, and choose the market with a higher maturity and more stable operation in the buy now, pay later market.
Tips: The information in this article is from the Internet and is for reference only and does not constitute any professional advice or service.