The Buy Now Pay Later (BNPL) payment method has taken Asia Pacific by storm. How should we make BNPL a more frictionless and painless digital experience?

FIS recently launched its annual Global Payments Report, which examines current and future payment trends across 41 countries.

2020 catapulted payments years ahead of projections. Digital post-payment methods grew partly because of social distancing and stay-home injunctions, and partly from businesses and shoppers looking for better ways to manage cashflow.

The Buy Now Pay Later (BNPL) payment method seems to have taken Asia Pacific by storm. How can BNPL providers maximize convenience while preventing authorization issues and fraud? How does technology help provide a frictionless and painless digital experience, as well as protect customers and businesses in the e-payments process?

DigiconAsia sought out some insights from Phil Pomford, General Manager for Global eCommerce, APAC, Worldpay, FIS:

Phil Pomford, General Manager, Global eCommerce, APAC, Worldpay, FIS

Why is BNPL growing as a payment method in Asia Pacific? What advantages does it have over other payment methods?

Pomford: Buy Now, Pay Later (BNPL) are post-purchase payments that allow consumers to make payments in interest-free instalments or pay off the invoice after a determined period – this effectively enables consumers to maximize their budgets to get the desirable items they want, while paying back the full amount over a longer period.

As a flexible financing option, BNPL has its place among Gen Z and Millennials in particular, especially as they prioritize services that fit with generational needs like practicality and convenience. Adding on the economic implications of the pandemic that is making individuals more budget-conscious, there is a demand from consumers to break high-ticket purchases into easier-to-manage repayments without the burden of interest rates.

For merchants, they are interested in payment options that can help convert people from browsers to customers. The seamless user experience that BNPL provides can help reduce cart abandonment and drive an increase in sales, hence it is increasingly being added to the payment mix.

It is worth noting that instalment-based payments are not a new concept. BNPL providers are, however, creating a digital, frictionless and smoother payment experience.

As a result of increased BNPL use among consumers, we have seen banks in other markets evolve their credit card propositions to offer lower minimum repayment sums or a more flexible repayment schedule – right from the get-go. According to Worldpay from FIS’s 2021 Global Payments Reports, credit card remains the most popular payment method both online and in-store in Singapore.

In which economies in this region is BNPL gaining good traction? Which industry sectors in Asia Pacific would be most impacted by developments in the BNPL space?

Pomford: BNPL is rapidly gaining traction across Asia Pacific, and the e-commerce sector would likely see the greatest impacts by developments in this space. Based on findings from our report, BNPL e-commerce market share will more than double in the region, from 0.6% in 2020 to 1.3% 2024.

BNPL will be the fastest-growing online payment method in Australia, India, Japan, Malaysia, New Zealand and Singapore. The following are some key stats for reference:

  • BNPL is forecasted to become 20% of the e-commerce market in Australia by 2024.
  • BNPL is set to increase by 197% to make up 9% of the online sales in India by 2024.
  • In Japan, BNPL is projected to make up 8% of all online sales by 2024, up from 3% in 2020.
  • Growing at a rate of 64%, BNPL will be the fastest growing online payment method in Malaysia, although its market share will remain modest (1.3% in 2024, up from 0.3% in 2020).
  • BNPL will overtake credit card as the most popular online payment method in New Zealand by 2024. Its market share is set to increase from 10% in 2020 to 38% in 2024.
  • In Singapore, while it is currently only 3% of e-commerce market, it is forecasted to increase its market share to 13% in the next four years.

Our merchant solutions business is also seeing an increasing popularity among consumers globally for a BNPL payment method. We recently entered a partnership with Afterpay for global payments processing and acceptance. We are excited to use our global scale to help drive their international expansion plans, and look forward to delivering education, innovation and adoption in the BNPL space.

What does BNPL spell for consumer debt? Will regulatory scrutiny affect its popularity in the region?

Pomford: More consumers are choosing BNPL as a way to budget and control finances, hence it is all the more important that they understand and are educated about BNPL especially around managing payments and interest. In this regard, it is crucial that consumers are made aware of the terms and conditions associated with their BNPL transaction, to avoid problems down the line.

As the digital payments landscape leaps forwards, the frameworks that govern and protect consumers and merchants must adapt to ensure that there continues to be trust and reliability in payments technologies.

Regulators across Asia have signaled that they are, or will be, reviewing the regulatory approach for BNPL schemes as the use of BNPL continues to grow. I believe having the right framework in place will help reinforce the viability of BNPL and enable consumers and merchants to reap the benefits of BNPL in a safe and secure manner. Worldpay will continue to collaborate with partners across the industry to deliver greater choice and transparency for both consumers and merchants. 

How do you see the BNPL landscape evolving in 2021 and beyond?

Phil Pomford: We can look to more mature BNPL markets such as UK and Australia to see where the industry is heading. These countries are taking steps to update regulations following high consumer adoption. We can expect more concrete industry guidelines to govern different aspects such as credit assessment, payment authorization, and marketing practices etc.

With the regional landscape becoming more competitive, it is also likely that BNPL offerings will evolve to be more sophisticated as local providers seek to differentiate themselves. They can look to do so in three areas.

Firstly, the loyalty that can be built by complementing BNPL with cashback or reward programs that encourage repeated purchases (e.g. Afterpay has launched a loyalty program, Pulse, that rewards on-time payments).

Secondly, the variety of merchants they acquire.

Lastly, how and where they make BNPL available, such as through overlay services like automated payment scheduling, QR code enabled payments and cross-border payments to deliver even more convenience, as well as being available both online and in-store.