Study: Buy now, pay later poised for substantial global growth

New data suggests that several factors will help drive usage of buy now, pay later (BNPL) flexible installment payments in the next five years.

According to a new study from Juniper Research, “Buy Now Pay Later: Regulatory Frameworks, Competitor Leaderboard & Market Forecasts 2022-2027,” the number of BNPL users will surpass 900 million globally by 2027. This will mark an increase of more than 540 million users from 360 million users in 2022.

Juniper Research data indicates this substantial growth of 157% will be driven by an anticipated economic downturn, which will increase the demand for low-cost credit solutions. BNPL solutions enable consumers to spread the cost of their purchases without interest charges; making them an alternative to credit cards. Additionally, BNPL services do not require hard credit checks, and an increasing number of retailers are accepting BNPL as a payment method.

The study identified India as particularly having potential for rapid growth in BNPL, with Indian BNPL users predicted to grow from 25 million in 2022 to 116 million by 2027. According to Juniper Research analysis, this situation is due to rising e-commerce usage and growing interest in international goods available through online retailers among Indian consumers.

In response, Juniper Research recommends that BNPL vendors in the developed world build strategic partnerships with BNPL vendors in developing markets with established consumer bases, to successfully capitalize on this user growth and associated revenue.

Virtual cards to further boost BNPL usage
The study also predicts that the adoption of virtual cards, where digital-only cards are used for purchases, will increase the usage of BNPL solutions. This is because virtual cards only require retailers to accept card payments - overcoming previous limitations on BNPL growth.

Juniper Research says that the advancement of virtual cards allows BNPL offerings to compete with credit cards, particularly in-store, where single-use BNPL cards can be used within a digital wallet to complete contactless transactions.

The study recommends that in order to compete in this competitive landscape, BNPL vendors must differentiate their services, including by offering virtual cards, browser extensions that automatically facilitate BNPL payment services, and digital loyalty programs.

Survey: Consumers misunderstand BNPL
A recent survey on consumer sentiments and understanding around BNPL from Zilch suggests that retailers and payment providers may need to educate consumers on how BNPL works. Thirty-one percent of surveyed U.S. adults have used a BNPL service, but more than four in 10 (43%) mistakenly believe these companies make money on the interest they collect from consumers.

And more than one in four (26%) Zilch study respondents believe that products sold through BNPL are marked up with BNPL providers collecting the difference in cost, and another 21% said BNPL firms earn money through secret/unadvertised fees that are paid by the consumer. A total of 31% of respondents said they don’t know how BNPL companies make money.

To obtain the Juniper Networks BNPL study click here.