The Global Payments Report 2024 from Worldpay projects continuing strong growth for Buy Now Pay Later (BNPL) as a payment form over the next five years. Underneath this positive outlook, however, lie deep structural changes in the BNPL market.
In 2023, consumer demand for BNPL as a payments form reached an all-time high. Worldpay’s Global Payments Report 2024 shows that BNPL global transaction values grew 18% in 2022-23 to reach a 5% share of global e-commerce spending, or more than $316 billion.
And this growth shows no sign of slowing down, with Worldpay projecting a rise of 9% Compound Annual Growth Rate (CAGR) in the years up to 2027, equal to that of global e-commerce.
As such, Worldpay project Buy Now Pay Later will retain its 5% share of spend world-wide through 2027.
BNPL: keeping pace with e-com growth despite headwinds
Rising popularity – but headwinds bring change…
The challenges Buy Now Pay Later companies face are not the result of declining popularity, given that consumer demand is at an all-time high.
Rather, BNPL companies continue to be challenged by high interest rates, looming regulation, lowered valuations, and a shift in investor focus from growth to short-term profitability.
“BNPL companies continue to be challenged by high interest rates, looming regulation, lowered valuations, and a shift in investor focus from growth to short-term profitability.”
While many Buy Now Pay Later firms are struggling through these headwinds, The Global Payments Report 2024 says that banks, fintechs, big techs and e-commerce platforms including Super-Apps continue to add BNPL to serve persistent consumer demand, bringing BNPL into the credit mainstream.
What happens next?
The headwinds outlined above saw at least a dozen BNPL firms discontinue operations entirely last year, including Openpay and Latitude Pay in Australia, Laterpay in Germany, myIOU in Malaysia, Zest in India and Pace in Singapore.
Although some players, such as Zip and Clearpay (Afterpay’s European brand), are pulling services from the European market, others, such as Klarna, seized the opportunity to expand and grab more market share as demand for BNPL services continue unabated – as well as branching out into a shopping platform.
This strategy appears to be working, as Klarna posted a quarterly profit in Q3 2023.
“Whether the model of “pure play” BNPL providers will succeed is unclear, even given the most favorable macroeconomic and sector dynamics.”
Other well-known global BNPL brands such as Afterpay, Affirm and Zip have diversified, pivoting from pure-play BNPL to offer a wider range of traditional credit services.
Whether the model of “pure play” BNPL providers will succeed is unclear, even given the most favorable macroeconomic and sector dynamics.
Longer term, The Global Payments Report 2024 projects that winners in the BNPL race could be those for whom BNPL is not the primary business model.
Major BNPL providers now include fintechs (PayPal Pay in 4), Big Techs (Apple Pay Later), banks (My Chase Plan, NAB Pay Later) and card networks (Visa Instalments, Mastercard Instalments). Google has also entered the space, announcing their intention to partner with Affirm and Zip to provide BNPL services via the Google Pay wallet in December last year.
Learn more about the dynamics of the global payments market and how they could affect your business – download The 2024 Global Payments Report from Worldpay
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