Jeremy Wong, Head of Strategic Partnerships at Atome, talks about the future of BNPL in the Asian market and the reason behind its astonishing success. He tackles the particularities of the region and what retailers should do to become a part of the successful ecommerce market.

Buy Now Pay Later has gained immense popularity amongst merchants and consumers globally, with the Global Payments Report 2022 by FIS-Worldpay forecasting it to be the fastest-growing payment method globally, in-store and not only, between now and 2025. 

While BNPL is seen as a rising global movement, even in the face of a softer macro landscape, it’s important to note that the BNPL use case and models across regions vary significantly. Asia is highly fragmented (eg. credit profile, shopping behaviour, culture, smartphone type), with a large unbanked and underbanked population, especially in emerging markets such as Indonesia, Thailand, and Vietnam. For example, in the Southeast Asia region (SEA), only 27% of the total population of 670 million inhabitants has a bank account. 

SEA is also leading the change in digital consumption, having added 60 million new digital consumers to the Internet economy since the pandemic started. Retailers partner with BNPL platforms to tap on these young and emerging digital consumers – shoppers who are mobile-first, digitally savvy, and going through pivotal life stages such as getting their first job or house, marrying or having their first child. It is estimated that by 2030, 75% of the consumers in Southeast Asia will be under the age of 30.

Physical shopping in SEA also remains a key social activity, never truer especially post-pandemic. Shoppers in the SEA region still value an omnichannel retail shopper experience, one that allows them to shop and purchase seamlessly online and offline, simply by using their smartphone. What this means for retailers and BNPL players in this region is that the physical store experience is critical when it comes to increasing in-store conversion, basket size, and the overall brand and shopping experience.

What’s next?

As BNPL matures in Asia, it has evolved from its basic model of offering interest-free monthly payments to a more end-to-end user experience that includes a wider range of deferred payment options like 6- or 12-months, greater industry adoption, social commerce, open loop card services, and broader financial products.

1. Greater industry adoption

With wider customer adoption and demand for payment choice and flexibility, other retail categories beyond fashion, lifestyle, and beauty categories are adding BNPL options at checkout to grow their customer base and boost their revenues. In Atome’s case, we’ve seen great demand from travel and hospitality, food and beverage, electronics and luxury, and premium retail sectors. We’ve also seen great demand from DTC (direct-to-consumer) brands such as UK-based The Hut Group (THG), as well as from China (SHEIN, Banggood), keen to grow and connect with a wider Asian customer base.

2. Open-loop payment services

To quickly scale and meet the growing demand from retailers, BNPL players are introducing open-loop payment services such as co-branded cards and ecosystem partnerships that will greatly accelerate BNPL acceptance across retailers who, for example, already accept Visa or Mastercard. Particularly in Southeast Asian emerging markets where credit card penetration is marked with single digits, the ability to offer cards with instant credit or pre-paid facilities or the ability to offer 6 or 12 month installments will also address a growing unmet demand. One example of this localisation at Atome is the launch of a shariah-compliant version of BNPL in Malaysia with a Muslim-majority population.

3. Social commerce

Social commerce has become the second most preferred shopping channel in SEA (78%), second only to ecommerce platforms (91%). A large majority of Gen Z and Millennials are leveraging social platforms not just to connect and explore, but also to shop and inspire. To meet their demands, we launched Atome Inspiration, a social commerce feature that recommends highly targeted and personalised content with “tap to buy” checkout options.

4. Customised merchant services

One of the key strengths for BNPL players is strong end-to-end understanding of user demographics and shopping behaviour that will be crucial in connecting with a community of young, aspirational, and digitally savvy consumers. For example, Atome+ drives co-branded initiatives with merchant partners to engage loyal customers with redemptions and loyalty points. Other merchant-enabler features include in-store retail staff training and brand ambassador programmes, merchant analytics dashboards, social CRM, and concierge-like membership services. 

As the growing BNPL opportunity gains momentum in the coming years, the evolution of BNPL will further enable and empower merchants and create a strong and holistic ecosystem that goes beyond payment to include end-to-end user engagement and value through every facet of the consumer’s purchase journey.

Source: The Paypers