It’s on a roll—the explosive growth of BNPL services has impressed everyone from FinTech market watchers to big tech companies like Apple and PayPal. At the moment, few expect this to slow down with the global BNPL market size expected to reach USD 39.41 billion by 2030, with a 26% compound annual growth rate from 2022-2030.
Built to accommodate ecommerce, point-of-sale (POS), and even “super app” functionalities, BNPL payment methods allow shoppers to purchase an item immediately and commit to paying for it later in weekly or monthly installments.
As more consumers use BNPL solutions in place of a credit card, it’s time for FinTech players to get up to speed with what the future holds for Buy Now, Pay Later and its prominent place in digital finance.
Let’s be honest. With many experts agreeing that there’s a global recession looming, it’s no surprise that alternative payment providers such as BNPL are expecting disruptions in their market share—from investors and merchants to consumers. Yet these risks must always to be expected and prepared for in any industry, and the first step in this process is having the right information.
BNPL companies, both big and small, can get ahead by consistently navigating the current digital payments landscape. Below, Star’s digital finance experts highlight the short- and long-term trends impacting the Buy Now, Pay Later market:
Expanding role in POS financing.
One of the main opportunities for BNPL players, amid less COVID restrictions and today’s market volatility, lies in in-person POS payments. A recent McKinsey survey found that (1) POS financing is growing quicker than any other unsecured financing and (2) roughly 60% of US consumers say they are likely to utilize POS financing within the next the next year. For BNPL providers, or anyone hoping to enter the installment-based digital payments space, POS financing should top the list as a high-value acquisition channel to compliment current ecommerce and/or smartphone apps. Afterpay, for example, which was acquired by Square, allows its shoppers to use their mobile wallet, which has a virtual Afterpay card, to access BNPL at in-person retailers. This allows retailers to receive their full earnings immediately, while the customer can choose the most convenient payment plan on the spot.
Competition will continue to rise.
As with any thriving market, companies of all types take notice and look for ways to make an entrance. Let’s just look at the numbers that are captured in Star’s BNPL infographic on global consumer behavior: 60% of customers spend more when BNPL is available and 81% have used a BNPL-specific app. That means adopting existing installment-based products or developing new BNPL solutions is on the radar of businesses everywhere. Their evolution can take the form of:
- Direct providers: From Japan’s Paidy to Sweden’s Klarna, these BNPL giants stand to gain the most from the industry’s development—with a full spectrum of uses from ecommerce and POS integration to their own super apps.
- Facilitators: From Mastercard to Stripe, these tend to be major payments companies with preexisting merchant networks that can be utilized to offer direct BNPL solutions and allow their entrance into the installment-based ecosystem.
- Retroactive providers: From Chase Bank to Apple, these providers allow customers to access installment financing options on all purchases made on their credit cards. These financing options tend to be associated with card issuers.
No matter where you fit in, all BNPL players need to find ways to diversify their revenue drivers. Look into avenues that can cement user engagement, like physical debit cards, or advertising-supported revenue models that can boost in-house apps.
- More regulation on the horizon. With the US Consumer Financial Protection Bureau’s inquiry into the BNPL sector last year, it’s prime time for anyone in the sector to get familiarized with any imminent policy changes in the countries that you operate—and strategically get ahead of them. These preparations should include finding ways to integrate BNPL into credit files and taking your BNPL ads in a new direction. Considering end-to-end FinTech services is another great way to prepare for regulatory changes and thrive in the digital ecosystem.
Like any market, unexpected challenges come and go, and the companies that weather the storm stand to gain the most. Within BNPL, the global market share remains massive—and Star provides holistic and professional services bring cross-industry methodology to co-create with clients on any continent. Jumpstart the journey with our digital finance experts to realize your next FinTech innovation today.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence