BNPL players are reinventing online commerce

The past few years have seen the exponential growth of buy-it-now, pay-later (BNPL) agreements, a trend that has been fueled by the acceleration of the digital shift and the surge in e-commerce activity. Now, this booming industry shows no signs of slowing down.

Senior industry analysts Bloomberg Intelligence estimate that global sales using BNPL could exceed US$181 billion by 2022, up more than 40% from US$93 billion in 2020.

This could push retail e-commerce penetration to 4% from just 1.6% in 2020, indicating that while BNPL options still represent a tiny portion of e-commerce sales, adoption is growing at a rapid pace and that the growth opportunities are significant. .

Chayan Hazra, Head of Payments Business – APAC, Pine Labs

“BNPL is the new trend that we are seeing across the world, and it is becoming very mainstream,” said Chayan Hazra, Head of Payments Business – APAC, Pine Labs, an Indian merchant commerce platform, during the last Fintech Fireside Asia Roundtable. .

“We’re seeing a lot of new customer segments that weren’t into BNPL and are now taking it on with great enthusiasm…Even in developed markets where credit card penetration is over 100%, like Australia, Western Europe, [customers are] always [embracing BNPL].”

For consumers, the appeal of BNPL agreements is obvious: users can buy what they need without having to pay the full cost upfront, and instead pay in installments over a period of time. .

These payment options are designed to be very convenient with streamlined registration and payment processes to minimize friction. In Southeast Asia, where smartphone penetration is high and the population young, delivering premium digital experiences has become an imperative for merchants.

“We are dealing with a generation where customers are using mobile-first as a way to consume and purchase goods, and need to be able to provide them with that shopping experience,” Trina Yeung, CFO, Atome Financial, l one of BNPL’s main suppliers in Southeast Asia. , said during the virtual roundtable.

“From a customer perspective, it makes a lot of sense because it’s convenient, it’s free, because it’s merchant-funded. Not only that, but it appeals to younger generations. Most of our customers are actually Gen Z and Millennials who are more inclined to buy using their mobile. Whether online or offline, people still want to pick up their cell phone, checkout and pay in seconds and have all that history and transaction data in one place.

Trina Yeung, Chief Financial Officer, Atome Financial

Trina Yeung, Chief Financial Officer, Atome Financial

E-commerce reinvented

For merchants, the benefits are there too and include higher conversion, higher basket size and access to hyper-targeted marketing capabilities that allow them to reach the right consumers, said Marnix Zwart, Head of Global Partnerships, Standard Chartered Bank.

By leveraging the massive amount of data they collect from customers, BNPL vendors are able to not only empower merchants to run more effective marketing campaigns, but they also help customers filter the noise, by actually focusing on the proposition of the products they like to increase customer satisfaction.

Collectively, these vendors are reinventing online commerce by connecting frictionless payments to the online shopping experience.

“What the BNPL suppliers did was they reversed the whole course,” Chayan said. “They took the discovery for themselves to determine which customers [the merchant is] targeting, what those customers need and what they are most likely to buy, so it becomes very targeted offers for them… These platforms deliver exactly the target you are looking for and ensure that the whole ecosystem and processes are very fluid.

This strategy has proven effective for many BNPL providers, allowing them to establish expansive business ecosystems.

“One of the trends we’ve seen is that [BNPL platforms are more and more] transforming into shopping apps, a [entire] the environment,” Marnix said.

“Bigger players like Klarna… are sort of becoming super apps now. This is a very interesting trend because they can capture more and more consumers on their platform. It also opens up new revenue streams and other opportunities.

Marnix Zwart, Global Head, Partnerships, Standard Chartered Bank

Marnix Zwart, Global Head, Partnerships, Standard Chartered Bank

Standard Chartered is among a growing list of traditional financial players that dip their toes into BNPL. Recognizing the potential to reach new customer segments, the bank announced in October 2021 a 10-year fintech partnership with Atome Financial that includes an investment of US$500 million – the bank’s largest fintech investment to date. .

The partnership will initially focus on providing BNPL services across Southeast Asia, before eventually expanding to other products and services, including banking, Marnix said. The two partners are now preparing to launch an BNPL proposal in Malaysia.

“For us, they have a completely different user profile than we normally have. It’s a segment that we want to do more of but we don’t have the experience, the knowledge and the skills, and even the technology that Atom has,” he said.

“We believe that Atome, with all its merchants and customers, is an ecosystem on its own, with very rich knowledge and a lot of interactions… When you know these consumers, understand them well, it’s is also an opportunity to discover other products. in the ecosystem.

Data analysis

BNPL players like Atome Financial rely heavily on data not only to deliver a proportion of value that customers and merchants love, but also for credit decision and fraud.

At Mobilewalla, a provider of consumer data and intelligence solutions, more than a dozen BNPL players now rely on company data to assess the risk of customer default as well as in the process. debt collection, said Anindya Datta, Founder, CEO, President, Mobilewalla.

Anindya Datta, Founder, CEO, President, Mobilewalla

Anindya Datta, Founder, CEO, President, Mobilewalla

“We provide predictive artifacts: data that predicts the likelihood of someone defaulting on a loan,” Anindya said. “We found that in South Asia and Southeast Asia, the average value of handsets in a household is very indicative of the likelihood that you will default on a loan.”

Other data and information, including household characteristics and app engagement, are also predictive of the likelihood of default, he said.

Using alternative data to help provide consumers with financing capabilities is particularly relevant in regions like South and Southeast Asia, where credit footprints are limited.

Marnix noted that in markets such as Vietnam and Indonesia, most people don’t have a traditional banking relationship. The cost of onboarding and the cost of serving these types of customers is simply too expensive for banks to offer them traditional loans and credit cards, making BNPL an attractive alternative.

Inasmuch as

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