Buy now pay later (BNPL) is having a moment. It has fast become the hottest trend in the payments industry, accelerating over the last year as consumers moved online.
Buy now pay later’s flexibility, transparency and convenience has attracted millions of shoppers worldwide. Especially as they look to move away from the interest and fees associated with traditional payment methods. As a result, industry giants are clamouring for a piece of the pie, racing to team up with BNPL providers.
A string of high-profile Buy Now Pay Later acquisitions
Earlier this year, Discover, a digital banking and payments company, invested $30 million in BNPL platform Sezzle. In September, PayPal announced it will pay $2.7 billion for the Japanese BNPL platform Paidy. At the same time Dubai based BNPL platform Tabby recently raised $50m in its series B financing. While, Indonesian BNPL giant Kredivo went public in a $2.5B Spac merger.
While in August, San Francisco-based payment company Square announced plans to acquire Afterpay for $29 billion. Ecommerce giants like Apple and Amazon are also becoming involved. Mastercard, Visa and American Express are all offering similar products. Closer to home, BNPL provider Zip announced plans to acquire Payflex for an undisclosed amount.
BNPL experiencing unparalleled growth
BNPL saw a 215% jump year-on-year in the first two months of this year, according to data from Adobe Analytics. While study from Financial Technology Partners predicts that BNPL will jump from 2.1 percent of all global payment methods to 4.2 percent in 2024, while all other payment methods except digital/mobile wallets will decline.
There will be over 45 million BNPL users in the US by the end of this year. While, according to market research firm C+R Research, 51% of consumers used BNPL services in 2020. The research further found that 38% of those new BNPL users expect BNPL services to eventually replace their credit cards.
At the same time, the South African buy now pay later market is expected to grow by 52.5% on annual basis to reach US$ 268.7 million in 2021.Payflex has also experienced exponential growth over the last year with more than 1,000 merchants and 135,000 customers.
The value for merchants
Efforts by payments giant to grow their footprints in the BNPL sector highlights the value the platform can bring to eCommerce merchants.
Apart from bringing merchants new customers, it helps drive sales and push up conversion rates and average order values. Having BNPL at checkout has also become an invaluable tool to help increase consumer trust, loyalty, and confidence during the purchasing journey.
With Payflex, merchants experience up to 70% increase in average order value, up to 80% repurchase rate, and up to 30% increase in sales.
Where to from here for Buy Now Pay Later?
Payments have become an invaluable part of the consumer journey. And as consumer appetite for alternative payment options grow, so will the demand for buy now pay later. This means this is just the tip of the iceberg for the payments platform. One thing remains clear: The future looks bright for the buy now pay later sector both on a local and global scale.