By Bharath Vellore, General Manager Provenir APAC
The last three years had a significant and unprecedented impact on the global e-commerce market. In the Asia Pacific (APAC), e-commerce sales are skyrocketing and are poised to reach a new milestone of $2 trillion by 2025, a testament to the growth of e-commerce platforms and the shifting consumer behavior from retail to online sales. With the whole APAC e-commerce segment booming, digitization and innovation have not only sustained the economy but have created numerous opportunities for businesses to expand domestically and regionally.
In India, the e-commerce market is set to outpace mature markets to become the third largest in the world with a valuation of $350 billion by 2030. This growth, spurred by social commerce, digital investments, and favorable policies have enabled both businesses and consumers to embrace digital platforms fully.
At the same time, Southeast Asia has experienced newfound resilience in 2021 through digitization and innovation that has propelled the region’s internet economy toward a $360 billion digitization trajectory by 2025. With strong investor confidence in the region, Southeast Asia’s Digital Decade will continue to increase gross merchandise value (GMV) toward $1 trillion by 2030. However, for the e-commerce sector to continue on this growth trajectory, financial inclusion is a challenge, especially since 70% of Southeast Asia’s population are either underbanked or unbanked and 8 in 10 customers in the region don’t have a credit card.
Financial inclusion and BNPL
Buy Now, Pay Later (BNPL) is a financial innovation that can help individuals without a comprehensive credit history to obtain a short-term financial loan to make a purchase and repay in installments at a later date, often interest-free or at low-interest rates. Often presented to a consumer at checkout, BNPL solutions need a crucial combination of data, artificial intelligence, and automated risk decisioning to approve loans in seconds, providing more convenience than other payment methods such as credit cards and online transfers. The flexibility it offers has been instrumental in driving financial inclusion and e-commerce convenience.
Benefits of Buy Now, Pay Later
The popularity of BNPL is largely due to the speed and convenience consumers are able to transact on a digital platform. Such processing takes just a few seconds and the repayment flexibility means that the consumer can spread payments out over time, allowing them to purchase necessary items without a significant upfront cash outlay. This flexibility in payment means that consumers can also check out faster, or even try products on e-commerce platforms before committing to the payment.
The benefits of BNPL are fueling its use — mass adoption is no longer a matter of if, but when.
Without the need to rely on traditional online payment methods, BNPL has the potential to overcome the barriers faced by marginalized communities, making our economies more inclusive. At the same time, an integrated BNPL business model ensures a more resilient, robust, efficient, and competitive market.