Newsletter #89 - Buy now, pay later industry in Asia

How 'buy now, pay later' is driving Asia's super apps like Grab, Gojek

This week, we’re paying attention to the growing payment trend that is “buy now, pay later”, or BNPL. It's where younger customers—the millennials and Gen Zers—are making purchases in instalments, as they want to keep up with the latest trends, save money and avoid using traditional credit cards.

Over the next 5 years, experts believe BNPL will be one of the fastest-growing modes of online payment globally. But there are also rising concerns about BNPL, such as potentially leading consumers into overspending and if governments need to set up better regulations for fair practices. Let's take a look.

Always be learning,

Team NC

💳 The emergence of buy now, pay later in Asia


As BNPL gains traction in Indonesia, banks are after a piece of the action [KrAsia]

Who’s in Indonesia? - Buy now, pay later offerings are gaining momentum among shoppers in SE Asia on the back of the e-commerce boom, especially in Indonesia over the past two years as e-commerce and fintech sectors mature there. Major players in this sector include Akulaku, Traveloka PayLater, GoPay, Ovo, and ShopeePay.

Traditional banks set eyes on BNPL - Not to be outdone, various traditional banks are developing their own BNPL products, while others are partnering with fintech and BNPL providers. Traveloka, for example, was tapped by state-owned lenders in the past 2 years for their BNPL offerings.

How banks compare to BNPL fintechs - Established banks have deeper balance sheets than even the most well-funded fintech startups, allowing banks to offer higher limits than standalone fintech providers. They also have large existing consumer and merchant bases that may be more willing to adopt new services. As banks develop new BNPL products to diversify their offerings, they’re creating new ways to reach customers who don’t own credit cards, like SME owners.


How BNPL services are driving Asia’s superapps like Grab, Gojek [Rest of World]

Other BNPL players in Asia - Southeast Asia’s aspiring super apps are offering buy now, pay later services to entice hard-to-reach consumers. Alongside the region’s biggest tech players, companies like Atome and Hoolah have sprung up across SE Asia to offer BNPL services to consumers, retailers (both physical and online) and food delivery services.

Financial inclusion or potential debt trap? - The companies bill themselves as offering a solution to the problem of financial inclusion. But observers and regulators worry that opaque lending criteria and aggressive promotions by companies trying to gain an advantage in a crowded space can put millions at risk of being hooked to spend beyond their means.

Still, Hoolah’s CEO says their company prioritises educating customers about financial literacy to prevent overspending, adding that Hoolah uses a proprietary algorithm to determine whether someone qualifies for their service, which is currently available in Singapore, Malaysia, and Hong Kong.


How BNPL fraud can occur and what banks can do [FICO]

How do these frauds occur? - They occur when someone uses false or stolen information while using a BNPL service. They are also more difficult to resolve than traditional fraud cases since merchants must approve/deny the transaction by the time the customer has made their purchase. This need for quick decisions makes BNPL an attractive target for fraudsters, since they’re more likely to get away without detection.

How can providers stop it? - BNPL providers should have strong authentication practices in place, such as requiring 2-factor authentication tests for customers, to prevent identity theft and fraudsters from completing a purchase. As for banks with BNPL offerings, use of machine learning on customer data has gained popularity to expose fraudulent behaviour by detecting unusual activity uncharacteristic of the user.

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