Buy Now Pay Later – Revolutionizing Payments and Shaping the Future

According to a report released by the fintech company UnaCash, a survey on the "Buy Now Pay Later" (BNPL) payment feature in the Philippines has been conducted. The results indicate that nearly half (49.6%) of the surveyed consumers in the Philippines have either heard of or used BNPL services, while only 37.4% have heard of it but never used it.

The popularity of BNPL in the Philippines has been evident for some time. An earlier research report published by UnaCash highlighted the significant traction of BNPL in the Filipino market. The data shows that from 2021 to 2023, the Gross Merchandise Value (GMV) facilitated through BNPL services experienced triple-digit growth: 118% in 2021, 178% in 2022, and 154% in 2023. This market is projected to continue to expand in 2024, with GMV expected to surge by 173%.

BNPL provides Filipino consumers with more payment options, catering to their psychological needs for greater flexibility in payments, and has garnered significant popularity. The trend is not limited to the Philippines; BNPL has already become popular in many countries.

BNPL is extremely popular worldwide and has been experiencing rapid growth. According to data from Market.us, the global market share of BNPL is projected to reach $16 billion by the end of 2023. From 2023 to 2032, the market is expected to expand at a compound annual growth rate (CAGR) of 25.5%, reaching an estimated $115 billion by 2032. Research from Exploding Topics indicates that the global user base of BNPL was 360 million in 2023, which is expected to soar to 900 million by 2027.

What is BNPL?

The term "Buy Now Pay Later" (BNPL) might sound unfamiliar at first, but the concept is well-known. BNPL allows consumers to enjoy products or services immediately and pay for them in installments over time without incurring interest or fees.

BNPL is fundamentally similar to credit cards and installment payments. This emerging payment method enables consumers to acquire goods or services first and then pay for them in installments over a specified period, rather than making a lump-sum payment at the time of purchase.

The installment options offered by BNPL are highly flexible, providing consumers with a variety of choices. Whether it's short-term repayments or longer installment plans, BNPL can be tailored to fit an individual's financial situation. This sense of instant gratification significantly boosts consumer enthusiasm and stimulates market activity.

BNPL Payment Models

The BNPL (Buy Now Pay Later) payment model has become commonplace in the global market, growing alongside e-commerce. While it is already widely used, it is experiencing significant growth in the cross-border sector, with substantial future potential.

To illustrate, let's consider a product priced at $100. There are two main ways consumers can use BNPL to pay for such a product:

?Interest-Free Installments: The consumer pays $25 upfront and then $25 every two weeks until the total $100 is paid off

?Deferred Payment: The consumer pays $0 upfront and then pays the full $100 on the last day of the period in one lump sum

BNPL serves as a superior "cash flow management tool" and a "more convenient payment method" for consumers. When consumers make payments using BNPL, the BNPL service provider pays the merchant the full amount upfront. The consumer then repays the BNPL service provider either in a lump sum or in installments over a specified period. Typically, the consumer pays an initial amount on the day of the transaction, with the remaining balance paid monthly. As long as the consumer adheres to the agreed repayment terms, BNPL does not charge interest or other fees.

BNPL Development Trends

According to the World Pay "The Global Payments Report 2023," BNPL (Buy Now Pay Later) accounted for nearly 5% of global e-commerce transaction value in 2023, amounting to approximately $316.5 billion, an 18% increase from 2022. By 2025, BNPL is expected to account for 9% of global e-commerce transaction value, projected to exceed $600 billion. The world's two largest BNPL companies, Klarna and Afterpay, have disclosed that merchants using their services have seen their average order value increase by 60% or more, with some individual merchants experiencing a 200% increase.

Research indicates that offering BNPL payment options can increase retail conversion rates by 20% to 30% and boost the average order value by 30% to 50%. Additionally, 38% of merchants report improved customer loyalty and satisfaction. Compared to traditional payment methods, merchants can offer short-term BNPL options for smaller-scale items like clothing and beauty products. In the U.S., McKinsey found that 39% of BNPL users use credit cards for their purchases. Reports show that younger shoppers favor this payment method: 37% of Gen Z and 30% of Millennials are BNPL users. According to JPMorgan Chase, the value of BNPL could reach $1 trillion by 2025.

As the BNPL model rapidly expands and gains popularity globally, more consumers are enjoying the convenience and flexibility it offers. BNPL has demonstrated strong appeal and growth potential, both on e-commerce platforms and in physical stores. With continuous technological advancements and further market expansion, BNPL is poised to become the preferred payment method for more consumers, bringing more innovation and change to the global shopping experience.

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