Younger females in APAC form largest market segment, new study shows
They’re female. They’re young. And many live in the Asia Pacific region.
When they can, they’re not afraid to borrow money. For air travel. For accommodation. For a new wardrobe.
Welcome to the world of buy-now-pay-later (BNPL), once the darling of the fintech sector but now running into serious headwinds as valuations fall and competition becomes cut-throat.
Younger females are the most likely to embrace buy-now-pay-later credit which has – according to Euromonitor International – gone from a “novelty” in 2016 to what is going to be, in most markets, “a significant portion of consumer credit in 2026”.
It is especially appealing to those described by Euromonitor as “under-banked” – those who don’t have bank accounts and have difficulty accessing traditional credit – of which there are millions in emerging markets like South-east Asia.
“Buy-now-pay-later offers these individuals the ability to find their way into the more traditional markets outside of the cash economy,” says Kendrick Sands, head of consumer finance research, Euromonitor International.
According to Sands, “Younger consumers who don’t qualify for traditional credit, or those who are sceptical of credit cards, now have a new avenue of credit. It’s the lowest cost credit option available and as the industry matures, it’s reaching new verticals.”
FinTech has enabled consumers to make a purchase “in the moment”, Sands says, usually through an API, such as Afterpay or Klarna, which boasts that consumers can “Shop Wherever. Whenever. And pay in 4 with zero interest”.
Clearly, there are pains being felt in the BNPL sector as it challenges the might of the global credit card industry. BNPL lenders need to provide greater financial education to consumers to ensure they do not have a negative experience with their short-term, interest-free instalment loans, Euromonitor says.
As well, BNPL players have work to do to establish trust with consumers “where mainstream financial institutions have already established those product relationships”.
Another consideration is that credit scoring will have to be reconciled in many markets, “because there is very little coordination between credit scoring institutions and BNPL lenders,” Sands adds.
Competition is also rife in the sector. Apple, Citi and PayPal have launched or announced plans to enter BNPL, while BNPL stocks have come off their highs of last year as the market revalues technology-based growth stocks.
In Australia, last year’s market darling Zip Co is closing its small Singapore business and has operations in Europe and the Middle East under review. Bad debts have stymied Zip’s expansion hopes.
In Singapore, ShopBack, the Rakuten-backed e-commerce loyalty platform, completed its acquisition of Hoolah last December, evolving it from a loyalty app for e-commerce purchases to enabling transactions with BNPL options.
To address consumer issues, brands such as Atome and Grab, and others, have established the “Buy Now, Pay Later Working Group” (BNPL WG to develop a BNPL framework for the local market, with the guidance of the Monetary Authority of Singapore (MAS).
Singapore’s BNPL market is expected to hit US$773.9 million in payments in 2022.
It is in the travel sector that BNPL will see considerable growth, according to Nadejda Popova, senior project manager – services and payments, Euromonitor International.
She says that there is ample evidence that BNPL is contributing to the rebound of the travel sector with OTAs like Expedia, Priceline and Lastminute.com offering different payment options, “transforming the holiday booking process, and making it much more simplified”.
In Indonesia, leading OTA Traveloka is leading the charge with various payment options, including BNPL.
Major carriers are also offering BNPL options for their customers in a bid to diversify their revenue streams. Popova believes that spreading the cost of an expensive flight ticket resonates with price-sensitive travellers who are looking for cheaper deals, especially when travelling long-haul.
She adds, “From the likes of Alaska Airlines to Qatar Airways to Lufthansa and Azul in Brazil, almost every big airline is offering that flexible financing and payment over a period.
“BNPL can offer the best solution in these economically challenging times for many consumers. It helps them to better manage their income, and to spread the cost of their big ticket holiday over time.”
BNPL is also boosting interest in luxury travel, making it much more accessible to different consumer segments,” Popova adds.
Among high-end hotels, Versace Dubai has been one of the first in the Middle East to offer payments in instalments. Shangri-La Hotels and Resorts in Asia Pacific became the first in Asia to sign a partnership agreement with Singapore-based Pace to cover its hotels in Malaysia.
A consideration for hotels, however, is that BNPL does not offer them the income gained from their affiliations with traditional credit card companies.
“The appetite for luxury travel is huge, especially when we’re talking about consumers, probably aged in their 20s or 30s. They might not have the means to make that full holiday purchase readily, which leads to that gap between the desire to buy and then the ability to pay,” Popova says.
“One of the main advantages of BNPL, in most cases, travellers do not pay interest or fees. You’re paying only for your holiday, nothing more.
In the inflationary times that we’re living in, it is so important to be able to plan spending as much as you can.”
Popova warns BNPL does not come without challenges. “We should never forget that BNPL is another form of credit, and in many cases, BNPL providers do not offer customer protection. Many are making inroads with protection, but it’s not the same as that offered by, for example, credit card providers.”
Featured image: B4LLS/iStock/GettyImagesPlus
