#bnpl buynowpaylater marketresearch PayNXT360
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Safaricom and Craft Silicon target market share in the Kenyan BNPL market in 2023
In Africa, the adoption of buy now pay later products is poised for accelerated growth over the next five years. Rising inflation and subsequent fall in disposable income have led many shoppers to turn to alternate financing sources like BNPL providers over the last 12 months. The market growth will be also driven by the higher number of unbanked and underbanked consumers across the region, who are turning to BNPL products to access credit and fund their daily purchases.
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The B2B BNPL sector is benefiting from soaring inflation and working capital optimization in 2023
Rising inflation levels have increased the pressure on small and medium enterprises, which were already reeling under the impact of the global pandemic outbreak. With worsening economic conditions, small and medium enterprises (SMEs) turned to buy now pay later providers to weather the cost-of-living crisis. Many businesses have leveraged business-to-business buy now pay later services to pay suppliers sooner and secure inventory more rapidly while extending their runway and improving cash flow. This has created the perfect growth environment for B2B BNPL providers globally.
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Alternate lending is on the rise across the African markets in 2023
Throughout Africa, alternate lending is growing into prominence at a rapid rate. The new-age financing platforms have provided consumers and small businesses with easier access to capital, which was previously unavailable through traditional banking channels. Many African consumers are turning to alternate lending to improve their lives and invest in their communities. Small businesses, on the other hand, are seeking credit to establish and grow their businesses in the region.
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Strategic partnerships continue to aid the buy now pay later industry growth in 2023
Despite the valuation slump experienced by major buy now pay later providers over the last 12 months, the broader market has remained resilient amid the current macroeconomic environment. Driven by factors such as increased adoption among consumers across age groups and the need to better manage their finances during a high inflation period, the global BNPL industry is poised for accelerated growth in H2 2023 and H1 2024.
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Klarna makes a resilient comeback with losses halved and profit on the horizon
In the first quarter, the Swedish buy now pay later giant recorded a significant improvement in its bottom line. Losses for the firm halved after a major cost-cutting drive was announced in 2022. Klarna, in the first quarter, posted a net loss of US$120.7 million or 1.3 billion Swedish krona. This is down by 50% from the 2.6 billion krona recorded during the same period a year before. The total net operating income surged 22% year over year to reach 5 billion Swedish krona.
https://www.paynxt360.com/view-point/klarna-makes-a-resilient-comeback-/691
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Lending through buy now pay later drives first-ever monthly profits for Monzo
The soaring demand for buy now pay later schemes, amid rising interest rates and an inflationary environment, has allowed Monzo to record its first-ever monthly profits in the United Kingdom. Monzo, in May 2023, announced that the firm had doubled its revenues to £355.6 million, over the 12-month period leading to February 2023. The significant growth in its revenue comes on the back of a strong lending book and a surge in interest rates.
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Klarna continues to move beyond a buy now pay later service with a suite of new feature launches in 2023
For some time now, Klarna has been seen positioning itself more than just being a buy now pay later service. It aims to become the one-stop solution for all online shopping needs of consumers. Furthermore, it is also positioning itself as a retail bank. The shift in strategy comes amid the growing competition in the global buy now pay later segment. In 2022, Klarna launched a bunch of new services and features as part of its strategy to move beyond just being a BNPL product. The trend has further continued in 2023, as Klarna launched various new features including an AI-powered shopping feed and ads manager for retailers to connect with high-intent shopper audiences, among others.
To know more and gain a deeper understanding of the BNPL market in Sweden, click here.
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Funding rounds highlight the investor confidence in the Middle East BNPL sector in 2023
Despite the bearish market sentiments in the global buy now pay later sector, the Middle East region is showing a strong growth potential. Low credit penetration, coupled with favorable regulatory oversight, are among the factors that are expected to aid the growth of the BNPL industry across the Middle East in 2023. Investor confidence is also high when it comes to the growth potential of the BNPL market and this is evident in the different funding rounds raised by providers.
In January 2023, Tabby, one of the leading BNPL firms based in Dubai, announced that the firm had raised US$58 million in its Series C funding round, which included participation from Sequoia Capital India, PayPal Ventures, STV, Arbor Ventures, Mubadala Investment Capital, and others. With the Series C round, the firm is now valued at US$660 million.
The demand for BNPL services offered by Tabby is driven by the growth of the e-commerce sector in the region. As the trend of online shopping continues to grow across the Middle East over the next five years, PayNXT360 expects the BNPL penetration to accelerate subsequently, thereby aiding the growth of the industry from the short to medium-term perspective.
Alongside Tabby, other regional firms are also seeking to capitalize on the growing use of deferred payment methods in the e-commerce sector. For instance,
In April 2023, Shaker Group, the Saudi Arabia-based manufacturer and distributor of home appliances, announced that the firm had acquired a 10% stake in Cashew, another BNPL provider in the Middle East. With its investment in Cashew, Shaker Group is planning to strengthen its e-commerce and retail platforms.
In collaboration with Cashew, Shaker Group is expected to offer its customers a digital financing solution. This will enable the firm to leverage the growing adoption of the BNPL payment method among customers while unlocking the growth potential in the e-commerce sector.
The growing adoption of BNPL schemes in the e-commerce sector also presents a growth opportunity for foreign providers. Consequently, PayNXT360 expects foreign BNPL players to expand their presence in the Middle East region, before the payment method becomes the standard in the online shopping space.
While regional firms are seeking to expand their market share in the fast-growing sector, a few of the players are also exploring to expand their business outside of BNPL. To support their expansion plans and drive business growth, these firms are also raising capital in the Middle East.
In March 2023, Tamara, another leading player in the segment based in Saudi Arabia, announced that the firm had secured a US$150 million debt facility from Goldman Sachs. Since its launch in September 2020, the firm had raised a total of US$366 million in equity and debt funding rounds.
In addition to supporting the accelerated demand for its BNPL product, Tamara is also planning to use the capital for expanding its presence in other business verticals. The firm, notably, intends to build a presence across retail, payments, and banking, where it sees a much deeper demand to fulfill with its technology.
These multi-million-dollar funding deals announced by Middle East-based BNPL providers are a clear indication that venture capital and private equity firms are foreseeing a strong growth potential in the regional market over the next five years. As the demand for making payments on credit continues to grow in the Middle East, BNPL usage is poised to experience accelerated growth.
Consequently, PayNXT360 expects more venture capital and private equity funding to enter the Middle East BNPL industry over the next three to four years. This will not only drive the industry growth but will also aid innovation from the short to medium-term perspective. The BNPL sector in the Middle East is also projected to experience an influx of foreign BNPL providers over the next three to four years, owing to the favorable regulatory environment across the region. As a result, PayNXT360 expects the competitive landscape to grow at a rapid rate in the Middle East BNPL market from the short to medium-term perspective.
To know more and gain a deeper understanding of the BNPL market in the Middle East, click here.
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Klarna and Sezzle are eyeing higher revenue and net income growth in 2023
The 12-month period in 2022 has been a challenging year for most consumer-focused BNPL firms. Declining valuations, increasing losses, and growing regulatory scrutiny are among the various issues faced by BNPL providers. The macroeconomic factors have also led to the downfall of firms like Openpay. In 2023, while the macroeconomic factors are projected to again pose challenges to the net income growth of BNPL firms, Klarna and Sezzle are among the firms that are eyeing profitability through their strategies.
Klarna, for instance, announced that the firm is aiming to return to profitability in H2 2023. In 2022, Klarna posted a full-year operating loss of US$1 billion, compared to the US$680 million loss reported in 2021. Although the losses have increased 47% during the 12 months, the firm posted smaller Q4 losses at US$188 million, compared to US$217 million in Q3 2022 and US$455 million in Q4 2021. The gross merchandise volume, on the other hand, reported an increase of 19% year over year in Q4 2022.
To help preserve the bottom line, Klarna adopted various cost-cutting measures, including the cut down in staff. The firm announced layoffs twice in 2022, once in May and once in September. Overall, the firm had sacked 10% of its workforce to drive down the costs of its operations.
Alongside cost-cutting measures, the rebound in the demand for BNPL schemes has also supported the growth in gross merchandise volume for Klarna in Q4 2022. Globally, more and more consumers have turned to BNPL schemes to fund their purchases during the year-end holiday season. For Klarna, the growth in gross merchandise volume has been also driven by the growing adoption of the payment method in the United States.
At the end of 2022, the United States had become the biggest market by revenue for Klarna. Over the 12 months, Klarna reported a 71% growth in gross merchandise value year over year in the United States.
As of February 2023, Klarna had amassed a total of 34 million users in the North American market. Of these, more than 8 million are active monthly users. This is much higher compared to the 6 million active monthly users in February 2022.
With a growing network of merchants across industry verticals, the monthly active user base for the firm is projected to continue over the next 12 months. Another strategy that has enabled Klarna to boost its active monthly users is the launch of a browser extension that enables shoppers to use the payment method at any online retailer, even if they are not partners. Notably, the introduction of the browser extension is driving more than US$6 billion worth of volume for Klarna.
This feature offers, coupled with others such as marketing opportunities for merchants, are projected to drive the revenue growth for Klarna in 2023, and therefore, leading the path to profitability.
For Sezzle too, the 12 months in 2022 have been a difficult year, during which the US$491 million merger deal with Australian BNPL provider Zip was also called off. However, despite the economic challenges and the called-off merger deal, the firm ended the year on a profitable note with total income reaching US$38.3 million. The termination of 20% of its workforce, coupled with other growth strategies such as renegotiation of merchant fees and exiting loss making operations in India, Brazil, and Europe, aided the revenue growth for the firm in 2022.
Furthermore, the firm has been building its premium offering, which now has 132,000 active subscribers as of February 2023. From the short to medium-term perspective, the firm is expected to adopt more such initiatives to drive revenue growth, thereby leading the firm on the path of profitability. The firm had announced that it had identified other revenue sources that can bring in an additional US$10 million.
From reporting a net loss of US$75.2 million in the financial year 2021 to ending Q4 2022 with a net income, Sezzle has shown that BNPL operations can be profitable. As Sezzle continues to build on its growth in 2023, PayNXT360 expects more firms to report strong revenue growth over the next 12 months, owing to various cost-cutting measures and growth-driven feature and product offerings.
To know more and gain a deeper understanding of the BNPL industry in the United States, click here.
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The B2B BNPL ecosystem continues to grow as more players, including banks, enter the market
Whilst the B2B BNPL sector is still in its infancy, the market is evolving rapidly as the ecosystem continues to grow at a significant pace. In 2022, a growing amount of venture capital and private equity funds entered into the B2B side of the buy now pay later (BNPL) industry. Seen as a lucrative growth opportunity, amid the heightened inflation that has put pressure on small and medium-sized enterprises, many new players, including banking institutions are foraying into the B2B BNPL market.
In January 2023, Santander CIB, Allianz Trade, and Two entered into a strategic collaboration to develop a B2B BNPL product targeted towards large multinational corporates. While Two is taking care of the payment technology, Santander CIB is financing payments to sellers and credit to buyers. Allianz Trade, on the other hand, is offering protection against non-payment risk.
The partnership between the three business entities comes at the time when Two and Allianz Trade partnered earlier in 2023 to provide small and medium-sized enterprises with financing solutions in the United Kingdom. On the other hand, Allianz Trade and Santander were exploring opportunities to fund large projects. To facilitate large B2B sales, these business entities have entered into a single collaboration to offer instant payment technologies to corporates.
In 2023, the B2B BNPL sector is projected to expand rapidly due to the current economic challenges faced by small and medium-sized enterprises. Consequently, providers have continued to raise growth rounds to expand their services.
Tranch, for instance, announced that the firm had raised US$100 million in a Seed funding round in January 2023. The capital round was led by Soma Capital and FoundersX. The firm is planning to use the fresh capital for bringing its B2B BNPL solution to more software-as-a-service sellers. Additionally, Tranch is also seeking to grow its team in the United States and expand into other business verticals.
In January 2023, Mondu, another B2B BNPL provider, announced that the firm had raised US$13 million in an extended Series A round. Notably, the firm raised US$43 million as part of its Series A round in 2022. The extended Series A round, led by Valar Ventures, means that the firm had raised a total of approximately US$90, since its inception.
Like Tranch, Mondu is also planning to use the capital round for driving its market growth, while also funding the development of new products. The B2B BNPL market is also gaining strong growth momentum in the Asia Pacific region, where firms are attracting venture capital and private equity dollars.
Singapore-based actyv.ai scored US$12 million in its pre-Series A funding round in January 2023. The capital round backed by 1Digi Ventures will be used for exploring global expansion opportunities. The US$12 million round also includes the US$5 million funding that actyv.ai raised from 1Digi Ventures in 2022. During the 12 months in 2022, the firm recorded strong growth, while its BNPL throughput exceeded US$100 million.
Amid the growing shift and focus on the B2B space and to capitalize on the high growth potential of the B2B BNPL market, firms are also entering into strategic collaborations and partnerships in the global market. actyv.ai, for instance, entered into a strategic collaboration with RATNAAFIN, an India-based NBFC firm. The strategic alliance is part of the firm’s strategy to facilitate embedded B2B BNPL offerings for micro, small, and medium enterprises. Similar trends have been observed in the European market, where the B2B BNPL sector has gained widespread popularity.
In January 2023, Hokodo, the B2B BNPL provider, announced that the firm had entered into a strategic alliance with Lemonway to help B2B marketplaces offer trade credit online in Europe. While Hokodo will evaluate the buying power of businesses in real-time, Lemonway will assist with payments and help platforms with regulations and compliance.
With many industries catching the trend of the B2B marketplace, there is a lucrative growth opportunity for financial institutions by offering seamless and quick payment solutions to businesses. In 2023, many more financial institutions, including innovative startups and incumbents, are expected to tap into the massive growth area of B2B BNPL. Consequently, the B2B BNPL ecosystem is expected to expand further and record strong growth over the next 12 months in the global market.
To know more and gain a deeper understanding of the global BNPL market, click here.
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The B2B BNPL segment has emerged as a strong business model in the United Kingdom
The B2B BNPL market has recorded strong growth in the United Kingdom in 2022, and the trend is expected to further continue in 2023. Amid the growing traction for B2B BNPL, venture capital and private equity firms have also shown strong interest in the space. Hokodo and Playter are among the players that have attracted funding in the United Kingdom B2B BNPL market. To offer their services to more merchants, these firms are launching innovative plug-ins. For instance,
In October 2022, Hokodo, the B2B BNPL firm, announced that the firm had launched a new plug-in, which allows merchants to offer instant credit to eligible buyers. The plug-in is available for Shopify merchants in the United Kingdom and has been designed with a simple implementation with no development work required.
The B2B space is expected to grow significantly over the next few years, as businesses need working capital to run their operations. In the high-interest rate environment, B2B BNPL becomes a more viable option, and consequently, firms are expected to keep raising funding rounds from venture capital and private equity firms.
In October 2022, MarketFinance, another B2B BNPL firm, announced that the firm had raised £30 credit facility to expand its B2B offering to small merchants and businesses in the country. As of October 2022, the firm had made available £45 million to over 2,000 buyers in the United Kingdom.
As investors foresee growth and profitability in the B2B BNPL space, the sector is expected to perform well over the next three to four years, compared to the consumer-focused BNPL market in the United Kingdom.
To know more and gain a deeper understanding of the BNPL in the United Kingdom, click here.
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The ever-expanding buy now pay later ecosystem in Southeast Asia
With relatively low financial inclusion and an even lower credit card penetration, buy now pay later has emerged as a preferred payment solution for many Southeast Asian consumers over the last two years. The BNPL adoption, driven by the global pandemic outbreak, has continued to grow at an accelerated pace. As a result, many of the leading internet companies in the Southeast Asian markets have entered the space to boost their revenue growth. Grab Holdings, Sea Ltd., and GoTo Group, are all providing their users with a BNPL payment solution to be used across different products and services.
Despite the economic challenges faced by BNPL providers globally, the payment method has continued to gain widespread adoption among consumers. With inflationary pressures and the subsequent surge in the cost of living having a severe impact on the monthly budget for many, BNPL has again gained rapid momentum in Southeast Asia. Amid the growing popularity and demand for flexible payment solutions, providers are forging strategic alliances to bring the payment method to more merchants and consumers in the region.
In January 2023, GHL Systems, one of the leading payment solutions providers in the region, announced that the firm will roll out the BNPL service offered by Grab for its in-store merchants. In 2021, GHL Systems rolled out the service for online purchases in Malaysia. Through the extended collaboration, GHL system merchant partners will be able to provide Malaysians with a flexible payment solution for in-store purchases.
Many of the payment firms in the region have been seen forging strategic alliances with BNPL providers in Southeast Asia. This trend is projected to further continue as BNPL firms seek to expand their merchant network, thereby providing consumers with their preferred payment type at more merchants.
In December 2022, Pine Labs, a merchant commerce omnichannel platform, announced that the firm has entered into a strategic partnership with 2C2P, a global payments platform. The partnership aims to expand the BNPL ecosystem in different Southeast Asian markets. The strategic alliance will cover Singapore, Malaysia, Indonesia, Hong Kong, the Philippines, and Thailand.
Unlike other BNPL solutions, Pine Labs works with partner banks enabling cardholders to make installment-based purchases without the need of downloading any mobile applications or subscribing to any mobile wallets. In collaboration with 2C2P, Pine Labs will enable customers to use the BNPL method at all of 2C2P's merchant partners in the six key Southeast Asian markets, thereby supporting the growth of the BNPL gross merchandise value and volume.
In a similar strategic alliance, Airwallex announced that the firm had entered into a collaboration with Atome in November 2022. The strategic partnership will enable Airwallex merchants to introduce BNPL payment options for their shoppers in Indonesia, Malaysia, Singapore, and Hong Kong.
This is the first time Airwallex had entered into a collaboration with BNPL providers, as it seeks to drive revenue and growth for its merchant network. Going forward, Airwallex is also planning to expand its collaboration with Atome in Japan, Thailand, and the Philippines.
In the Philippines, BNPL providers and digital banking firms are also entering into strategic collaborations to further accelerate BNPL gross merchandise value and volume, by onboarding more customers on the BNPL platform. For instance,
In November 2022, CIMB Bank Philippines and SeaMoney entered into a strategic alliance to onboard 2.5 million customers on the SPayLater service in 2023. Through strategic collaboration, CIMB Bank is seeking to expand its loan portfolio and further accelerate its growth. In 2022, the digital bank disbursed PHP 25 billion to its borrowers. On the other hand, the collaboration with CIMB Bank will enable SeaMoney to scale its BNPL service at a rapid rate, amid the growing demand for a flexible solution among Filipinos.
All of these strategic collaborations to enable more merchants to offer BNPL payment options and to onboard more customers to a specific service has resulted in a fast-growing BNPL ecosystem in Southeast Asia. PayNXT360 expects the trend to further continue across the region, as demand for BNPL is projected to remain strong, among both customers as well as merchants from the short to medium-term perspective. The growing competitive landscape is also projected to drive venture capital and private equity funding in the Southeast Asian market over the next three to four years.
To know more and gain a deeper understanding of the BNPL market in Asia Pacific, click here.
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Japanese banks are eyeing growth in the popular buy now pay later category in the Asia Pacific region
Traditional banking institutions have continued to lose market share to new-age digital banking firms. In FY 2021, MUFG, one of the three megabanks in Japan, reported approximately 700,000 new account openings, whereas digital banking firms such as Rakuten Bank garnered more than 1 million new accounts. This growth in new account opening for digital banks is partly attributed to innovative payment solutions, such as buy now pay later, offered by these players.
In Japan, flexible payment solutions such as buy now pay later (BNPL) have gained widespread popularity, especially among young generation consumers. To capture the expanding market and drive new accounts, megabanks such as MUFG are seeking to enter the BNPL segment, both in the domestic and international markets, from the short to medium-term perspective. As part of its ambition to capture the growing BNPL market, MUFG has already entered into strategic acquisition and investment deals.
In Japan, MUFG is buying a 70% stake in Kanmu, the domestic fintech firm which utilizes technology to determine consumer creditworthiness. The deal, worth US$150.6 million, will enable MUFG to issue debit cards with BNPL capabilities. This will allow the firm to provide short-term credit to consumers without additional screening.
The banking giant has adopted a differentiated approach in offering short-term loans to consumers. Credit cards, for instance, utilizes information such as annual income to extend loans. However, with debit card-based post-payment services, banks only need to verify creditworthiness based on past purchases.
Currently, Kanmu users can access Visa prepaid cards by entering their names and age. If they do not have sufficient cash on hand, the fintech firm provides them with short-term loans of up to 50,000 yen on the card, which the users can repay at month's end, along with fees at local convenience stores. As of September 2022, Kanmu has garnered 6 million application downloads, with teens and those in their 20s accounting for more than 50% of the downloads in Japan.
MUFG is expected to utilize the technology offered by Kanmu to incorporate the BNPL facility on its debit cards. The acquisition is projected to complete in Spring 2023 and the rollout of the BNPL facility might follow soon thereafter. The strong customer base of MUFG, approximately 34 million, will also expand the BNPL sales channels for the fintech firm in Japan. In addition to the domestic market, MUFG is also seeking BNPL market share in other countries in Southeast Asia.
In December 2022, MUFG invested US$200 million in Akulaku, the Indonesia-based fintech firm that provides BNPL services. The investment is in line with the bank’s goal to expand into new markets and products in 2023. Along with Indonesia, Akulaku also has a presence in the Malaysian and the Philippines market, where it offers a virtual credit card and installment shopping platform. In collaboration with MUFG, Akulaku will work on product development, financing, and distribution in the Southeast Asian region.
The strategic investment will allow MUFG to further grow its presence in the Southeast Asian market, where the BNPL payment solution has recorded strong growth and is projected to further continue its growth momentum. Before making the investment decision in Akulaku, MUFG also purchased the Indonesian and Filipino units of Home Credit BV in a deal valued at €596 million.
The expansion in the Southeast Asian market is part of the firm’s strategy to gain back market share from homegrown firms such as Indonesia-based Bank Central Asia and Singapore-based DBS Group Holdings. In addition to driving its market share in the region, the firm also aims to meet the financial needs, through the BNPL payment method, of the underserved customers in Southeast Asia.
In the United States, Mastercard and SoFi partnered to develop a BNPL solution. In December 2022, Worldline also launched an in-house BNPL service to cater to the growing demand for payment solutions in the travel sector. The growing presence of these leading financial institutions in the BNPL segment is a clear indication that the outlook of the flexible payment solution remains strong from the long-term perspective.
Consumers have already shown a strong appetite for BNPL adoption. The BNPL sales figure, during the Black Friday event, have surged significantly compared to last year. The macroeconomic environment, rising inflation and surging cost of living, has severely dampened consumer spending globally. To give consumers more purchasing power and drive sales growth, the adoption among retailers is projected to continue at a rapid pace from the short to medium-term perspective. This will keep driving the gross merchandise value and volume for BNPL providers in H1 2023.
To know more and gain a deeper understanding of the BNPL market in Asia Pacific, click here.
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Education and healthcare sectors are expected to drive the next growth phase for BNPL firms
Over the last few years, the buy now pay later industry has matured significantly. From branching out from retail to encompass services of all types, the evolution of buy now pay later (BNPL) products has been rapid with popularity among consumers growing exponentially during the global pandemic outbreak. While the BNPL industry is facing challenges amid the current macroeconomic conditions, popularity among consumers has continued to grow. The rising cost of living and interest rates means that more and more consumers across the world are turning to BNPL products to fund their purchases.
Notably, merchandise is not the only thing consumers are looking to fund through BNPL. Education and healthcare services are following closely behind as the current economic environment and the rising cost of living puts pressure on the monthly budget of consumers globally. For many, education has been one of the leading reasons for taking out loans. Tuition, books, and room rents, among others, are the various things that students need to fund during their academics. Consequently, making BNPL a perfect fit for the education sector.
The growing need among students to access credit has resulted in many players, beyond schools, dipping their toes into the BNPL segment. For instance,
Digital education merchants, such as Simplilearn, upGrad, Fortuna Admissions, Knowledgehut, and ThinkLouder, are all offering BNPL payment options. These firms have partnered with Splitit, one of the leading players in the BNPL segment in the United States. Notably, Splitit has a network of more than 100 merchants offering BNPL options in the education sector.
The partnership with Splitit has allowed digital education merchants to increase their sales volume by 350% since 2019. In Q3 2022, the firm recorded a growth of 225% quarter over quarter, with a month left in the quarter. This shows the growing demand for BNPL payment options in the education sector. On average, students are spending US$1,500 over 8.5 installments. This is much higher compared to US$1,240 over 7.26 installments in 2021.
Along with Splitit, players such as Zip and Humm Group in Australia, are also offering BNPL payment solutions to students to pay for their college tuition.
Like education, the demand for BNPL is also growing significantly in the healthcare sector. In the United States, healthcare affordability has been a long-standing issue. BNPL players are looking to fill this gap by offering consumers the ability to finance their health procedures in the same way as they would fund their retail purchases. For instance,
Splitit has partnered with medical payments firm Docpay, thereby increasing the number of healthcare deals by 50% over the last six months, leading to October 2022. Furthermore, the firm has also partnered with orthodontics, respiratory tech, and in-vitro fertilization providers.
In the United States, Future Family is among the several startups that are aiming to make fertility treatments more affordable. The San Francisco-based firm launched a product that allows borrowers to repay the loan in 12 months at zero interest. Before this, the interest rate charged was between 6% to 18%.
Zip is another player in the healthcare sector that has partnered with merchants in dentistry and in-vitro fertilization. Notably, Zip allows borrowers to make repayments over the length of treatments. It is offering plans of up to 60 months.
For BNPL firms such as Openpay, the healthcare sector offers a lucrative growth opportunity, as repayment plans can be associated with the continued provision of treatment. Therefore, making it in the consumers' interest to meet timely repayments. This can lead to lower default rates for BNPL providers as compared to the one-off retail purchases. Notably, to keep the missed repayments as low as possible, Openpay has linked its BNPL service to specific procedures. The firm is more focused on categories such as dentistry, where patients often have a long-standing relationship with healthcare providers, thereby ensuring they make timely repayments.
In times of rising interest and the surging cost of living, PayNXT360 expects that the demand for BNPL solutions will further increase among consumers from the short-term perspective. Consequently, PayNXT360 expects more firms to forge alliances with education and healthcare providers over the next few quarters, thereby driving the growth of the industry over the next three to four years.
To know more and gain a deeper understanding of the United States BNPL market, click here.
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BNPL firms are raising funding round to accelerate their growth amid growing consumer demand
The buy now pay later (BNPL) industry has experienced a severe downturn in 2022, after enjoying a high-growth period over the last few years. Amid the tussle with regulators globally and declining valuations due to the current macroeconomic environment, BNPL firms have found it difficult to reach profitability. However, amid the mounting losses for these firms, the bigger trend for the sector remains positive due to the surging demand for payment options among consumers globally. Notably, the rising cost of living and inflation rates have again created the perfect environment for BNPL consumer adoption and spending.
With the demand rising among consumers, BNPL players have further started to expand their presence through strategic partnerships. Firms, such as Klarna are forging an alliance with food delivery platforms like Deliveroo, as consumers find it difficult to even fund their food purchases. Furthermore, amid these testing times for consumers, the demand for BNPL has also increased in the healthcare and education sector, where the ticket sizes are usually higher compared to other sectors. Overall, the consumer demand for BNPL is high and firms are responding to this demand by raising capital. For instance,
In August 2022, Tabby, one of the leading BNPL players in the Middle East region, announced that the firm had raised US$150 million. While the firm acknowledged that rising inflation and looming recession fears have impacted BNPL players in developed markets, the demand for BNPL in the Gulf region is expected to further grow among consumers.
The demand for BNPL is also high in the region because access to credit is scarce. According to Tabby, 20% of the population in Saudi Arabia has access to credit compared to 70% in the United States. This has supported the growth of Tabby and in H1 2022, wherein the firm recorded a growth of eight times in its active customer base, when compared to H1 2021.
The demand for Tabby is expected to further increase in the region and consequently, the firm had raised US$150 million to support the rising demand. Notably, the firm is planning to keep its focus on the core markets, including the United Arab Emirates, Saudi Arabia, and Kuwait. However, it also has plans to expand operations in Egypt. Unlike players in the developed market, the firm is also nearing profitability and therefore, has been able to raise huge capital under the current market conditions.
Notably, Tabby is not the only player in the region that has attracted investment from global players. Many other firms have raised funding rounds to further scale their operations and support the growing demand among consumers. For instance,
In August 2022, Tamara, the Saudi Arabia-based BNPL firm, announced that the firm had secured US$100 million in a Series B funding round. The firm is planning to use the capital to further drive its growth and expansion of product offerings across shopping and payments. As of August 2022, the firm had onboarded over three million users and has partnered with 4,000 merchants across the region.
The trend of raising capital is also evident in other markets, including Southeast Asia as well as Europe, where the B2B BNPL business model has grown into significant prominence in 2022. For instance,
In September 2022, BillEase, one of the leading BNPL players in the Philippines, announced that the firm had raised approximately US$20 million in a debt facility. This funding round will allow the firm to further grow and expand its loan portfolio, amid the rising demand for BNPL among consumers. In H1 2022, the firm has recorded a growth of 5 times in volumes compared to H1 2021.
In June 2022, Zilch, the United Kingdom-based BNPL firm, also announced a capital round of US$50 million, bringing its Series C investment to US$160 million. The firm is planning to use the capital to further accelerate its growth, especially in the United States. Notably, in the United States, the firm is experiencing high traction among consumers, with over 150,000 pre-registered customers.
From the short to medium-term perspective, PayNXT360 expects more global BNPL firms to raise capital to further support the growing demand among consumers. While the sector is projected to remain under pressure due to the macroeconomic condition, consumer demand is expected to keep driving the transaction value and volume for these BNPL players over the next few quarters. Furthermore, the upcoming holiday season should also assist the consumer BNPL spending.
To know more and gain a deeper understanding of the global buy now pay later market, click here.
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BNPL giants are targeting in-store transactions to drive growth amid rising competition and macroeconomic threats
As the impact of the global pandemic continues to diminish, consumers are again returning to their pre-pandemic shopping habits. Online sales have been impacted and there are several factors responsible for the drop. Inflation has surged and interest rates have grown significantly. This has led some consumers to forgo buying big-ticket items such as electronics, which are often purchased online. For others, the need to get out and socialize is driving the growth of in-store transactions.
As consumers turn to in-store shopping, BNPL giants are also pivoting their strategy to drive growth amid rising competition and macroeconomic threats. Several players, including Klarna and Zip, have been seen targeting in-store transactions to accelerate their transaction volume and value. For instance,
In October 2022, Zip, one of the leading BNPL players based in Australia, announced that the firm had entered into a strategic alliance with WebBank. Under the strategic collaboration, the two firms are launching a physical card, as Zip looks to make in-roads into the growing in-store shopping trends.
The Zip card will allow consumers to use the Pay-in-4 feature offered by the firm at all retailers wherever Visa is accepted. Under its pilot program, the firm revealed that more than 90% of the consumers stated that a BNPL card makes the in-store transaction easier. Notably, a waitlist of 250,000 users shows the demand for physical BNPL cards.
Other global leaders in the BNPL segment, such as Klarna and Afterpay, have also increased their focus on in-store transactions. These firms are looking to make major in-roads in the offline retail segment through strategic collaborations and tie-ups with leading brands. For instance,
In July 2022, Klarna entered into a strategic partnership with Blackhawk Network, a branded payments provider. This collaboration will bring the BNPL payment method offered by Klarna to consumers shopping with offline merchants. This partnership will span beauty, electronics, groceries, and other categories.
In May 2022, Clearpay, also known as Afterpay outside the United Kingdom and Europe, announced that the firm is extending its BNPL services to smaller high-street retailers across the United Kingdom. Notably, the firm launched the BNPL service to large merchants in November 2021.
With compelling results, the firm has now extended its offering for smaller merchants, thereby enabling them to increase their basket sizes and sales. During the three-day sale event organized by Clearpay, smaller merchants experienced a growth of 32% and 33% in sales and new active customers, respectively.
In May 2022, MultiPay announced that the firm had forged an alliance with Mastercard to launch in-store BNPL service for consumers in Ireland. Notably, Mastercard has also forayed into the deferred payment space to capitalize on the high growth of the segment and the growing popularity of the BNPL product among consumers globally.
The in-store transactions are expected to rise significantly over the next few years. Consequently, BNPL firms globally, including in the Middle East and North Africa region, are also targeting in-store transactions. For instance,
In September 2022, Tabby, one of the leading BNPL providers in the region, announced that the firm had entered into a strategic collaboration with Paymob, a digital payment solution. This collaboration means that the BNPL service offered by Tabby will be available at over 120,000 Paymob merchants, both online and offline, in Egypt.
This move to attain a big share of the in-store transactions comes at a time when online BNPL space is saturating. Notably, many online merchants are offering BNPL payment options from various providers. With little to no differentiating factor, BNPL players are finding it difficult to capture consumer spending online.
The competition in the online segment has intensified and macroeconomic issues have dampened the growth prospect for BNPL firms around the world. Rising interest rates and fears of recession have forced BNPL firms to re-evaluate their growth strategies. Furthermore, regulation is taking shape in the background. Several governments, including Australia, the United Kingdom, and the United States, have drafted BNPL regulations, which include strong credit checks and tightening oversight over the operations of these players.
This is expected to further slowdown the growth of BNPL providers. Consequently, the move to capture in-store transactions can fuel the growth of players like Klarna, Zip, and Afterpay amid the tighter market conditions over the next three to four years. Furthermore, consumer in-store spending is projected to grow significantly in Q4 2022. Consequently, non-e-commerce retail sale is where these players are targeting to drive the next growth phase of the global BNPL market.
To know more and gain a deeper understanding of the global BNPL market, click here.
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