Southeast Asian Buy Now Pay Later Growth Opportunities

Market Expansion, Technology Capability, and Large Partner Ecosystem to Continue Transformational Growth

The payments industry is now lucrative for start-ups to tap into new niche market segments and promote financial inclusion in groups with limited access to credit services from banks. The buy now, pay later (BNPL) solution has emerged as an alternative credit payment for consumers, enabling them to make purchases without paying the total amount upfront. The solution allows consumers to make monthly payment installments within three to six months with no interest charge. BNPL solutions are increasingly available online and in physical stores.

The Southeast Asian BNPL space is highly fragmented and competitive, comprising BNPL providers, electronic commerce (eCommerce) companies, multiservice providers, and banks. Strongly funded participants dominate the market, potentially pushing weaker participants out of business in the long run. Market consolidation is ongoing and expected to continue as bigger participants acquire smaller ones. Domestic participants will embrace consolidation for more capital and market share to compete with leading global BNPL providers, which are expected to penetrate the market in the region.

Next-generation technologies in lending and payments solutions, combined with big data, artificial intelligence, and machine learning, will help BNPL stakeholders deliver services more effectively and securely. These technologies enable providers to map customer profiles based on credit history, spending habits, and social media analytics for a complete assessment of customer creditworthiness and risk to improve the credit underwriting process. Advanced technologies are critical to generating market growth. Cloud-hosted and modular solutions to fit the needs of merchants and end-customers will see widespread adoption among BNPL providers. These providers are likely to expand their service portfolio with holistic solutions. Increasing collaborations between banks, leading regional payment providers, and local stakeholders, such as merchant aggregators and payment acquirers, will accelerate growth opportunities for BNPL.

BNPL start-ups with promising advanced technology strategies and investment support, such as Kredivo, Atome, and Akulaku, have established their bases and generated profit. These providers aggressively expand their footprint in emerging markets to broaden their customer base while enhancing BNPL capabilities. Other stakeholders in the BNPL market, such as established eCommerce (Shopee, Lazada, Traveloka) and ride-hailing companies (Grab, GoJek) have transformed their businesses to offer value-added services, including BNPL solutions, and create new revenue streams. Ecommerce and mobile commerce (mCommerce) critically drive BNPL adoption and will continue to do so in the long run.

This study covers the BNPL market in key Southeast Asian countries: Indonesia, Cambodia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. It bases the market overview on online and physical/in-store merchants, offering insights into key companies in the region and providing market forecast discussions and total transaction volume forecasts based on the market’s growth drivers and restraints.