Buy Now Pay Later (BNPL) Platform Market

2016-2020 Buy Now Pay Later (BNPL) Platform Demand Outlook Compared to 2021-2031 Forecast

The payments sector is undergoing significant transformation with the continued growth of e-commerce, digital payment technologies and changing consumer values. This includes a shift in consumer preferences, away from traditional credit options in favor of alternative products that offer interest-free borrowing and budgeting features.

As a low-commitment, user-friendly, and budget-focused alternative to credit cards, BNPLs are particularly favored by tech-savvy Millennials and Generation Z, who are wary of credit cards. A new wave of buy now pay later (BNPL) platforms, which allow consumers to buy an item and pay later in interest-free instalments, have lately been shaking up the traditional credit card business.  

The buy now pay later (BNPL) platform demand is estimated to rise at 22.4% CAGR between 2021 and 2031 in comparison with 17.6% CAGR registered during 2016-2020.

Nowadays, the use of buy now pay later (BNPL) platform for shopping has particularly increased among millennials and Gen Z customers. Since these customers look for convenient budgeting tools, buy now pay later (BNPL) platform help them to easily meet their budget needs.

Consumers choose to use BNPL for various reasons - the installment payment model and associated consumption smoothing effects, budgeting support, convenient access to credit and the ability to shop through online marketplaces offered by BNPL providers. As a result, BNPL is supporting the shift in consumer preferences toward better financial control and is rapidly becoming a significant component of retail spending around the globe. 

The global buy now pay later (BNPL) platform solution is anticipated to witness an increase in market revenue from ~US$ 6.2 Bn in 2021 to ~US$ 46.9 Bn by 2031.

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How is Buy Now Pay Later (BNPL) Platform Emerging as a Popular Trend among the Youth?

Younger generations are hopping on the trend to save money, buy clothing and keep up with their peers instead of using traditional credit cards. Buy now pay later platforms that allow customers to make purchases in installments are growing in popularity in various countries.

Millennials and Gen Z represent a disproportionate percentage of users bolstering BNPL companies, with the average customer for Afterpay, Klarna, and Australia-based Zip Co. Limited. Nearly 70% of Afterpay’s user base falls into the 18-34 age group. While over 70% of millennials and roughly half of Gen Z across established and emerging credit markets have credit cards, BNPL is increasingly coming into focus as an attractive alternative to paying with credit.

Since BNPL payments became more mainstream, Gen Z digital buyers have been flocking to these alternative payment services in larger numbers than their millennial counterparts have. A major driver of buy now pay later (BNPL) platform, particularly for younger cohorts, is financial flexibility.

These solutions provide younger consumers, whose cash flow tends to be more limited, with greater flexibility in payments, especially for larger-ticket items. As buy now pay later (BNPL) platform move more into services like travel, business services, and even healthcare, the adoption among older consumers is also likely to grow in the coming years.

What Is the Impact of COVID-19 Crisis on Buy Now Pay Later (BNPL) Platform Growth?

COVID-19 pandemic has impacted every sector. Due to social distancing norms implemented to contain the spread of the virus, organizations transformed towards digitalization to ensure overall safety employees and staffs.

The COVID-19 pandemic is expected to have a positive impact on the buy now pay later (BNPL) platform demand. With the crisis limiting household income across the globe, the search for liquidity has been elevated and is expected to continue so throughout 2021.

Moreover, banks are often deterred from providing credit in challenging economic environments. In such cases, BNPL solutions help customers in paying their bills in installments. As a result, BNPL transactions have significantly increased during the COVID-19 pandemic.

The COVID-19 lockdown has driven a new normal in retail shopping, where consumers are more confident purchasing items online with various online payment gateway. BNPL helped customers break down large expenses into smaller, interest-free EMIs, rather than having to dig deep into their wallets. BNPL not only eased purchases of daily essentials but even brought aspirational products within reach.

Thus, the buy now pay later (BNPL) platform is estimated to witness a noteworthy growth from around 19% to 20% Y-o-Y from 2020 to 2021.

Country-wise Insights

How big is the Opportunity for Adoption of Buy Now Pay Later (BNPL) Platform in the U.K.?

Europe is predicted to remain one of the most attractive markets during the forecast period. According to the study, the U.K. is expected to register a CAGR of around 29% between 2021 and 2031.

Shoppers in the U.K. consider retail finance as a convenient way to split the cost of expensive purchases. Moreover, the market is now attracting interest from some of the world’s biggest companies, with PayPal launching its own BNPL service, Amazon and Apple partnering with U.S. provider Affirm, and Afterpay being sold to Square.

Two of the U.K.’s hottest fintech companies are trying to get into the market. Monzo and Revolut, two of Britain’s best-known financial technology firms, are planning to enter the booming “buy now, pay later” industry. Hence, the demand for buy now pay later (BNPL) platform would increase across the country, during the forecast period.

Why is Demand for Buy Now Pay Later (BNPL) Platform Increasing in the U.S.?

The buy now pay later (BNPL) platform demand in the U.S. is expected to rise at an impressive CAGR of around 27% over the forecast period. BNPL is currently a small portion of the US payments system but it is becoming significant in various sectors.

According to study conducted by Afterpay, spending on BNPL has increased rapidly in the past two years – up 230 percent since the start of 2020. This is more than five times the rate of growth for spending using debit (43 percent), and exponentially higher than credit card spend growth (8 percent).

This growth is expected to continue as the US catches up to more mature BNPL markets such as Australia. At current growth rates, BNPL could contribute more than 10 percent of US e-commerce spend by 2024, in roughly the same time as it took the Australian market to mature.

How is Mexico Contributing towards the Growth of Buy Now Pay Later (BNPL) Platform Market?

The buy now pay later (BNPL) platform sales in Mexico was valued at nearly US$ 145 Mn in 2020. When it comes to solutions that offer financial flexibility, buying online with interest-free monthly installments is certainly appealing. This has been the key reason why many investors are looking at BNPL startups in Latin America.

Therefore, it’s not surprising that some of BNPL Latin American startups are already on the path to grow exponentially. Mexican-based Atrato and Addi, which originated in Colombia, are just two of them. These companies have been raising huge funds for the expansion of its BNPL platforms globally.

So far, Addi has a presence in Colombia and Brazil but plans to reach more countries, including Mexico. These two BNPL startups have common goals: to continue growing in order to provide a simple, card-free payment option that allows the unbanked population to purchase online.

How will the Sales Prospects for Buy Now Pay Later (BNPL) Platform Solutions Unfold in India?

The sales in India are estimated to increase at an impressive rate of around 22% CAGR between 2021 and 2031. Although there are relatively few buy now, pay later companies in India, they typically focus on enabling online purchases.

For instance, Mumbai-based ePayLater gives customers the option to pay for travel, food, or other online products and services interest-free within 14 days. Bangalore-based Simpl has a platform where customers can select from 4,500+ online stores, check out with one tap, and pay later.

In India, the demand for BNPL has been growing for about 2-3 years, further accelerated by COVID-19. The pandemic-induced economic changes drove people to look for ways to fund their purchases, including essentials. BNPL emerged as more than a convenient payment method; it essentially decreased the financial burden on borrowers by offering no-cost EMIs.

Category-wise Insights

Why is the Demand for Buy Now Pay Later (BNPL) APIs Projected to Increase?

Based on solution, buy now pay later (BNPL) APIs is expected to increase with a robust CAGR of nearly 24% over the forecast period. The APIs let clients integrate installment payment products into their offerings. In addition, credit card issuing partners are able to develop their own BNPL solutions. They can change things like the duration of the loan, interest, fees, and merchants.

For instance, in July 2021, Visa has set up a website providing its credit card issuing partners with APIs to develop and pilot their own instalment payment solutions. Users can choose the duration of loans, the participating merchants and cards, and the interest and fees. APIs are then available to check eligible plans for a transaction, select a plan, convert the original transaction into an instalment plan and then to schedule the payments.

Why is the Adoption of Buy Now Pay Later (BNPL) Platform Mostly Preferred in Large Organizations?

The large organizations segment accounted for more than 50% of the overall market share in 2020, and is expected to continue its dominance during the forecast period. Large enterprises are widely adopting the buy now pay later payment solution as it offers customers a flexible and affordable payment method for purchasing high-value products. The ease of shopping also enables customers to purchase more products, thereby driving the sales. Thus, BNPL helps large enterprises in significantly improving customer experience.

Moreover, the increasing preference among organizations for efficient service platforms and automation capabilities is expected to drive the demand for buy now pay later (BNPL) platforms in the large enterprises segment.

How will Demand from Retail & eCommerce Sector Support Growth?

The retail & ecommerce segment is expected to expand with a significant CAGR of around 27% during the forecast period. As the ecommerce market boomed, so too did the business for the buy now pay later (BNPL) platform companies that helped startups interact with credit lending institutions.

Retailers offering a buy now pay later (BNPL) solution enable customers to choose a financing plan and pay in installments instead of having to pay the entire cost up-front. As the world of ecommerce continues to grow and change, it’s not surprising that payment methods are included in this. Digital wallets have been on the rise for years, but the trends haven’t stopped there; today, more customers favor buy now, pay later than ever before.

Competitive Landscape

Maximum number of leading players in the buy now pay later (BNPL) platform industry are coming with advanced and innovative solutions that meets the ever-changing demand from various organizations. A high number of retailers is focusing on accepting these point-of-sale and online installment loans as a payment method, thereby creating growth opportunities for the BNPL solution providers.

• For instance, in September 2021, PayPal Holdings, Inc. announced that it has agreed to acquire Paidy, a leading two-sided payments platform and provider of buy now, pay later solutions in Japan. The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country.

Scope of Report

Key Points Covered in Buy Now Pay Later (BNPL) Platform Market Survey

• Which region is expected to showcase high growth in buy now pay later (BNPL) platform demand?

  North America is projected to register strong growth in the market, exhibiting a CAGR of nearly 26% during the forecast period. However, South Asia & Pacific currently leads the global market, with market share of around 29% in 2021.  

• Who are some of the leading companies offering buy now pay later (BNPL) platform?

  Some of the leading companies in this landscape are Klarna Inc., Affirm, Inc., Afterpay Limited, Zip Co Limited, and Humm Group among others. As per Future Market Insight, nearly 45%-50% of the market share is currently covered by the top 15 players.

• Who are the leading industries adopting buy now pay later (BNPL) platform? 

  BFSI segment is expected to dominate the market over the forecast period, generating a maximum revenue, among all industries, by the end of 2021. However, the retail & ecommerce segment is estimated to register a higher rate of adoption through 2031.

• How much is the global buy now pay later (BNPL) platform market worth?

  The buy now pay later (BNPL) platform industry was valued at ~US$ 5.2 Bn in 2020, and is estimated to grow at an exceptional pace with a CAGR of 22.4% from 2021-2031

• What will be the demand outlook/ sales forecast for buy now pay later (BNPL) platform?

  The sales of buy now pay later (BNPL) platforms is likely to reach ~US$ 46.9 Bn by 2031.

• What was the last 5 year market CAGR?

  The market in last 5 years (2016 – 2020) grew by a CAGR of 17.6%.

• What are the key trends of buy now pay later (BNPL) platform industry?

  Key trends shaping the market includes:

  • Healthcare sector to majorly alter the BNPL industry
  • Buy Now Pay Later (BNPL) Platform emerging as a popular trend among the youth
  • Funding for BNPL startups to boost market growth

• What is driving demand for buy now pay later (BNPL) platform?

  Increasing awareness about installment-based payment methods and the absence of interest fees charged by BNPL platforms has majorly increased the adoption and are the key factors driving the market growth.

• Which countries are key providers of Buy Now Pay Later (BNPL) Platform?

  Countries involved in providing buy now pay later (BNPL) platform include the Australia, U.S., U.K., and India.

• What was the Global Buy Now Pay Later (BNPL) Platform Market Growth Between 2020 and 2021?

  The global market growth between 2020 and 2021 is around 20%.

• What are the top 5 countries driving demand for Buy Now Pay Later (BNPL) Platform?

  Top 5 countries driving demand for buy now pay later (BNPL) platform include the U.S., India, Japan, U.K., and Germany.

• What is South Asia & Pacific Buy Now Pay Later (BNPL) Platform Market outlook?

  South Asia & Pacific is predicted to remain one of the most attractive markets during the forecast period. According to the study, Australia & New Zealand is expected to collectively account for nearly 26% of the South Asia & Pacific market through 2031.

• What is the key Buy Now Pay Later (BNPL) Platform market statistics in South Korea and Japan?

  The buy now pay later (BNPL) platform demand in Japan and South Korea was valued at ~US$ 283 Mn and ~US$ 128 Mn in 2020, respectively.

Buy Now Pay Later (BNPL) Platform Outlook by Category

By Solution:

• Buy Now Pay Later (BNPL) Software
• Buy Now Pay Later (BNPL) APIs
• Services
  • Technology Consulting
  • Integration & Deployment
  • Support Services

By Enterprise Size:

• Small & Medium Enterprises (SMEs)
• Large Enterprises

By Industry:

• BFSI
• Retail & eCommerce
• Healthcare
• Media & Entertainment
• Travel & Tourism
• Automotive
• Others

By Region:

• North America
• Latin America
• Europe
• East Asia
• South Asia & Pacific
• Middle East and Africa (MEA)