Buy Now, Pay Later (BNPL) is one of the fastest-growing alternative payment methods, enhancing consumer buying power and digital inclusion.
As e-commerce extends its reach, a wide variety of alternative payment methods are providing new ways for consumers to increase their buying power and manage online purchases.
Among the fastest-growing of these online payment methods is Buy Now, Pay Later (BNPL) – which allows consumers to cover a small percentage of the total purchase price upfront and then pay off the rest in installments over a period of time.
The global BNPL market is expected to achieve a whopping 45.7% CAGR during the current decade, growing from a modest $90.69 billion in 2020 to nearly $4 trillion by 2030. Although the most established BNPL regions are currently Europe and North America, BNPL is also on the rise in emerging markets, where it often serves as a more accessible credit alternative for consumers who lack access to traditional credit cards.
In addition to helping more people around the world to participate in the digital economy, e-commerce merchants benefit from a larger customer base and higher average order values.
What are some of the other advantages of BNPL? Read on to see how Buy Now Pay Later benefits merchants as well as consumers, and which BNPL payment methods are the most popular across different regions of the world.
Advantages of Buy Now, Pay Later for merchants
22 BNPL leaders around the world
BNPL solutions in the Middle East & Africa
BNPL solutions in North America
Buy Now, Pay Later provides a more consumer-friendly way of accessing credit when paying for goods online. Credit decisions are typically made within seconds, with more attainable financing options for a broader range of customers. In many emerging markets, BNPL helps to increase digital and financial inclusion, serving as an alternative credit source for individuals who aren’t covered by traditional financial products or services.
By increasing buying power, BNPL also boosts the accessibility of e-commerce. Consumers spend 55% more when they can split the payment into installments.
Merchants offering BNPL and other credit products, meanwhile, benefit from increased sales thanks to improved conversions and higher transaction values for certain types of payments. On PayU’s payment platform, transaction values in markets with installment payments are up to 10 times higher than for other payment methods.
It’s simple. Customers feel more comfortable making larger purchases online because they can use a secure repayment option. Meanwhile, sellers are paid out for the entire payment amount at the time of purchase, eliminating any credit risk from the merchant perspective.
That’s why more and more merchants are bringing BNPL onboard as a payment method – building a competitive advantage by making a wider range of products more affordable to the widest possible range of consumers.
BNPL is becoming increasingly popular across the entire continent, driven by the media coverage of high profile IPOs, massive homegrown players like Klarna, and double-digit e-commerce expansion in the fast-growing consumer markets of Eastern Europe.
The European BNPL market will grow to nearly $350 billion by 2025 – amounting to approximately 30% of projected e-commerce spending.
Here are some of the top European BNPL providers:
With lower penetration rates until now due to lack of customer awareness and limited availability of providers, Asia-Pacific is set for record BNPL growth in the coming years, with a projected CAGR of 145% by 2023.
Here are some the key Asian market leaders in BNPL:
With EMEA as a whole accounting for the world’s largest share of BNPL transactions via e-commerce, the Middle East and Africa will be key BNPL markets to watch over the coming years.
Here are some of the key solutions which are increasing the share of digital BNPL transactions across these two dynamic regions:
While Europe may have established itself first as the leading BNPL stronghold, the United States, Canada and Mexico aren’t far behind. In 2021, the number of BNPL users in the US had increased by 81% year over year. In addition to homegrown giants like PayPal and new BNPL entrants like Affirm, the US is also a top growth market for international names like Klarna (Sweden) and AfterPay (Australia).
In addition to Klarna, which has established a foothold in the US, here are a few of the top BNPL players in North America:
Credit card penetration is low in most LatAm markets – creating a ripe environment for the growth of BNPL as an alternative. With a long history of installment payments for retail purchases that even pre-dates the internet, today more than 45% of e-commerce payments in LatAm are made via installments.
The majority of BNPL startups focus on Gen Z consumers, but South America is also full of interesting BNPL payment methods for other segments. Here are a few of the top names:
Australia has been one of the fastest adopters of BNPL solutions. Today customers pay for around 8% of all e-commerce transactions in installments. This volume is expected to grow to about 17% by 2023.
These leading BNPL solutions take a large chunk of the Australian market, and have also moved into other parts of the world – particularly North America:
With Buy Now Pay Later becoming increasingly popular as an alternative payment method around the world, a wide range of established players and new BNPL startups have emerged to fulfill the demand.
For merchants interested in offering BNPL across multiple global markets, choosing the right BNPL provider – or working individually with multiple BNPL services – can be a challenging proposition. The alternative is to choose a payment provider with the capability to enable both global as well as specific-to-market BNPL payment method options in different geographies.
Offering a combination of homegrown BNPL offerings as well as connections to local banks and alternative payment methods around the world, PayU provides merchants with the capability to offer a wide range of BNPL options and other payment methods at checkout.
As BNPL continues to increase its market share within the payment landscape, merchants should take note – and look for a global payment solution that can keep up with the trends.
BNPL, an alternative payment option, enables customers to initially cover a minor portion of the total purchase cost and pay the remaining balance through installments over a specified period. It is a fast-growing online payment method that increases buying power and makes e-commerce more accessible.
Merchants offering BNPL benefit from increased sales, improved conversion rates, higher transaction values, and a larger customer base. They also receive the entire payment amount at the time of purchase, eliminating credit risk from their perspective.
Europe and North America are currently the most established BNPL regions. However, BNPL is also on the rise in emerging markets, where it serves as a more accessible credit alternative for consumers who lack access to traditional credit cards.
The global BNPL market is expected to achieve a 45.7% CAGR during the current decade, growing from $90.69 billion in 2020 to nearly $4 trillion by 2030.
Some leading BNPL providers include Klarna and PayPal in Europe, LazyPay and Cashalo in Asia, Payflex and RCS in Africa, Affirm and Afterpay in North America, Addi and RecargaPay in South America, and Afterpay and Zip in Australia.
Merchants can choose the right BNPL provider by considering their target markets and working with a payment provider like PayU, which can enable global and specific-to-market BNPL payment method options in different geographies.
Consumers benefit from BNPL services by having more possible financing options for a broader range of purchases. This allows them to manage their expenses better, access credit more easily, and actively participate in the digital economy.