What’s BNPL and how does it help you? indiabusinessport.com

The last three years had significant and unprecedented impact on the global ecommerce market. In Asia Pacific, ecommerce sales are skyrocketing and are poised to reach a new milestone of $2 trillion by 2025, a testament to the growth of ecommerce platforms and the shifting consumer behavior from retail to online sales. With the whole APAC e commerce segment booming, digitization and innovation has not only sustained the economy but has created numerous opportunities for businesses to expand domestically and regionally. 

India’s BNPL market stands at $3 to $3.5 billion today but is expected to see a huge surge of up to $45 to $50 billion by 2026. During this period, it’s predicted that BNPL users will increase up to 80-100 million.

In India, the ecommerce market is predicted to outpace more mature markets to become the third largest in the world with a valuation estimated to be around $350 billion by 2030. This growth, spurred by social commerce, digital investments and favourable policies have enabled both businesses and consumers to embrace digital platforms fully.

However, while India’s economy is fast-growing, formal credit is still much harder to access, especially in comparison to other developed nations. Financial institutions (FIs) are developing new payment products to help address this gap. Traditionally, the definition of formal credit would include financial products such as personal loans, mortgages, and auto loans. But now, banks and financial institutions are increasingly focusing on credit cards, BNPL and credit EMIs as alternatives to credit cards.

BNPL is set to become the fastest growing online payment facility by 2024, with market shares expected to scale the 9% mark, a 6% increase from 2021, according to Goldman Sachs’ Growth Equity report. 

BNPL is reportedly India’s fastest-growing online payment method as highlighted by financial technology company FIS. BNPL is predicted to grow up to 8.6% of the e-commerce market value by 2025, an increase from just 3% this year. At the same time, Southeast Asia has experienced newfound resilience in 2021 through digitization and innovation that has propelled the region’s internet economy towards a  $360 billion digitization trajectory by 2025. With strong investor confidence in the region, Southeast Asia’s Digital Decade will continue to increase gross merchandise value (GMV) towards $1 trillion by 2030. However, for the ecommerce sector to continue on this growth trajectory, financial inclusion is a challenge, especially since 70 percent of Southeast Asia’s population are either underbanked or unbanked and nine in ten customers in Southeast Asia don’t have a credit card.

Financial Inclusion and BNPL

Buy Now, Pay Later (BNPL) is a financial innovation that can help individuals without a comprehensive credit history to obtain a short-term financial loan to make a purchase and repay in installments at a later date, often interest-free or at low interest rates. Often presented to a consumer at checkout, BNPL solutions need a crucial combination of data, artificial intelligence and automated risk decisioning to approve loans in seconds, providing more convenience versus other payment methods such as credit cards and online transfers. The flexibility it offers has been instrumental in driving financial inclusion and e commerce convenience. 

Benefits of Buy Now, Pay Later

The popularity of BNPL is largely due to the speed and convenience consumers are able to transact on a digital platform. Such processing takes just a few seconds and the repayment flexibility means that the consumer can spread payments out over time, allowing them to purchase necessary items without a significant upfront cash outlay. This flexibility in payment means that consumers can also checkout faster, or even try products on ecommerce platforms before committing to the payment.

The benefits of BNPL are fueling its use – mass adoption is no longer a matter of if, but when. 

Without the need to rely on traditional online payment methods, BNPL has the potential to overcome the barriers faced by marginalized communities, making our economies more inclusive. At the same time, an integrated BNPL business model ensures a more resilient, robust, efficient and competitive market. 



Views expressed above are the author’s own.


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