BNPL to Grow Nearly 9-Fold through 2025 in Southeast Asiaby Fintech News Singapore October 10, 2023
In Southeast Asia, the rise in Internet penetration and smartphone usage, coupled with the region’s booming e-commerce sector and large population of unbanked, are providing fertile ground for alternative payments to strive.
Buy now, pay later (BNPL) arrangements, a type of short-term financing that allows consumers to make purchases and pay for them over time, have grown considerably over the past years and will continue to gain prominence in the years onwards.
Estimates by the International Data Corporate (IDC) indicate that in 2020, BNPL options were used to purchase US$900 million worth of goods on e-commerce platforms, a sum which the organization expects will rise by nearly ninefold to US$8.83 billion in gross merchandise value (GMV).
The metrics, shared in a report produced by super-app operator Grab, suggest that BNPL spend in Southeast Asia will expand by more than US$7.9 billion through 2025 and showcase that these payment options are poised to grow in importance and adoption.
Delving deeper into regional trends, the study reveals that Indonesia will be contributing significantly to the growth of BNPL in Southeast Asia, making up 58% of all BNPL spend on e-commerce platforms by 2025.
While Indonesia will be holding the lion’s share, Vietnam, the Philippines and Malaysia are the countries that are expected to see the strongest growth in BNPL usage. In Vietnam, BNPL spend is forecast to rise 23-fold to reach US$960 million GMV through 2025. In the Philippines, that growth will be tenfold (US$570 million GMV), while in Malaysia, BNPL spend is set to increase ninefold (US$610 million GMV).
The rise of BNPL arrangements in Southeast Asia has also been observed by Grab, which says it’s witnessed significant traction for its BNPL product. In Malaysia, the firm says it’s experienced a 4.5-fold uplift year-over-year (YoY) in the number of partnered brands for BNPL arrangements, while in Singapore, that number increased fourfold.
Besides increased traction from merchants, the firm also reports rising usage of its BNPL product, PayLater. Looking at quarter-on-quarter (QoQ) growth, Grab says BNPL usage among its users increased sevenfold in Singapore, sixfold in Malaysia and fourfold in Thailand in Q2 2022.
Fashion and beauty, in particular, are two segments that are witnessing significant growth in PayLater adoption. Between Q3 2021 and Q3 2023, usage of PayLater increased more than twofold in the categories in Singapore. In Malaysia, PayLater usage increase 2.6-fold and 1.5-fold for the fashion and beauty categories, respectively.
Mobile wallets’ rise in prominence
BNPL usage in Southeast Asia has been growing alongside mobile wallets. In most of the region’s key markets, these apps have become among the most often-used payment sources across the region, emerging as the top payment method in Vietnam (42%), Malaysia (41%) and Thailand (34%) in Q2 2023.
Southeast Asia boasted more than 154 million mobile wallet users in 2020. IDC expects new mobile wallet users to grow 1.6-fold, adding more than 250 million users by 2025 to reach a total of 404 million users.
Indonesia is set to maintain its position as the region’s largest mobile wallet market with an estimated 207 million users by 2025, followed by the Philippines (65.2 million).
The rise of BNPL and mobile wallet usage in Southeast Asia comes on the back of a booming digital economy.
Southeast Asia is home to 370 million digital consumers. 75% of the region now has an online presence, and 88% are identified as smartphone users. Countries including Singapore, Malaysia, and Thailand currently lead in smartphone penetration with rates of 88%, 83%, and 75%, respectively.
Despite the encouraging metrics on digital adoption, six out of ten people in the region are unbanked and only 17% of transactions are cashless. These parameters are introducing strong growth prospects for digital payments and fintech solutions overall.
In 2022, digital payments gross transaction value exceeded US$800 billion, representing a surge of over 35% since 2019. Projections for 2025 indicate continued growth in digital payments. Between 2022 and 2025, the region is expected to see digital payments gross transaction value grow by 46% to reach US$1.2 billion. Countries like the Philippines, Indonesia and Vietnam are expected to witness the strongest growth, rising at rates of 64%, 58% and 44%, respectively, from 2022 and 2025.
Featured image credit: edited from freepik