Buy now pay later (BNPL) is a market that has caught the eyes of the millennials and Gen Z. Hardly any of the older generation people use this facility. A credit card is something similar, only it has a business model that runs on a high rate of defaulters. BNPL on the other hand is enticing for the younger generation as it does not penalize the customers with a credit rating. This brings much more flexibility to make purchases with lesser disposable cash in the short term. This facility in its entirety is a win-win situation for businesses and customers alike.
The Demographic Divide
As per RationalStat survey 2021, it was found that almost close to 15% of the population between the age group of 18 to 34 years used BNPL as a way to make purchases during the festive season in contrast to 0% of the population of the age group 65 and above opting for this option. This is in context to the North American and European markets that are expected to be saturated. The Asia-Pacific holds the key and will determine the future course of the market that will positively boost the aforementioned market. The outlook is positive due to the sizeable population.
India & China are Key Markets Across the Globe
Asia Pacific will dominate the market in the coming years with a CAGR of over 50% as per RationalStat due to the demographic dividend the region holds. India along with China holds the key to the sector's overall growth. China has the world's largest population but the annual growth rate that replaces the older is falling sharply. India holds the age with the youngest population in the world and the rising disposable income coupled with a better standard of living and better ambition in career growth opportunities. All these factors narrow down to the importance and relevance of India along with China for the outlook of buy now pay later market.
Global Fintech Firms on the Rise
The recent phenomenon in the most promising markets of India having a higher number of fintech firms getting unicorn status is something to take note of. To name a few to gauge the magnitude Razorpay, PayTM payments bank, and ZestMoney. This doesn’t include big MNC stalwarts like Amazon, Flipkart (backed by Walmart), the Tata group, and the renowned Reliance group. All of them combined not only show a promising trend for the market, but it has the potential to disrupt the age-old way of using credit cards to make purchases.
“Sailesh Ramakrishnan, Partner at Rocketship. vc expects BNPL to be a key aspect of e-commerce”
What’s Fueling the Market?
Under-penetrated market, the rise of the internet at dirt-cheap prices with the fastest-growing smartphone market, and a flexible work culture during the ongoing pandemic has all led to a growth in the market. Or simply put, these are the catalyst to fuel the market’s growth. Many first-time users are on the internet and have not experienced seamless shopping experiences. The buy now pay later is providing a cushion and flexibility to those untapped markets that have the potential to drive exponential market growth. The growing disposable income coupled with the rapid digitalization being the flagship project of new India has provided the much-needed impetus to the sector.
E-Commerce Platforms: The New Beacon of Hope
The global e-commerce platforms are the flag bearers of this model of payment. The very same Amazon and Walmart rivalry has taken new twists and turns in the Indian market. The pandemic has transformed almost every business sector across the globe. In the meanwhile, a positive outcome was the introduction of BNPL by both Amazon and Walmart. This move not only skyrocketed the sales for both companies but has contributed to enormous financial gains.
The global impact of this market is very promising but the significant and the fastest growth impact for the very same business model is likely to be witnessed in Asia-Pacific dominated by India and China.
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Co-founder and Director at RationalStat
Ujjwal is a thought leader and recognized expert in the market research and consulting field. He is the co-founder at RationalStat, a leading global market research & procurement intelligence firm with 10+ years of industry expertise.