Whether it is small businesses or savvy e-commerce platforms, firms in Southeast Asia are adopting ‘buy now pay later’ (BNPL) with more fervor than ever. One of the best examples is the lazada installment plan, which recognizes the opportunity that BNPL payment strategies are bringing, not just for the platform, but its countless customers as well.
What is Buy Now Pay Later(BNPL)?
BNPL, essentially, enables buyers to purchase a product and then pay over an extended period. Installments can be paid on a weekly, bi-weekly, or monthly basis. The BNPL strategies that we are seeing in Singapore, for instance, the lazada installment plan, comes with attractive features like zero interest and ease of use.
Current scenario of BNPL in Singapore
As per the 2020 e-Conomy SEA report, Asia Pacific is slated to be the fastest-growing region, as far as the embracing of BNPL is considered, for the period between 2020 to 2027. This opening up to BNPL is being largely attributed to the region’s growing population of internet users. A whopping 40 million new users were added to the internet user base in Southeast Asia, and this figure was just for 2020. With this addition, the total number of internet users in the region has reached 400 million.
Taking Singapore specifically, approximately 1.1 million people have relied on BNPL. This is as per an October 2020 consumer survey that was conducted by Finder. Moreover, this number tells us that a good 38% of the total population of the country is known to have used BNPL. It indicates that the country is moving towards embracing mobile payment methods and therefore, making use of e-commerce strategies such as the lazada installment plan.
As per Tech in Asia chart, it is evident that both investors, as well as BNPL firms, are eyeing certain markets more than others. Among those select few markets in Singapore. This investment influx has been very beneficial in the funding of innovative BNPL strategies, like the lazada installment plan. In the funding round of last year, BNPL funding hit a record high.
The utility of BNPL for customers
One of the principal reasons why BNPL has been able to gain such traction in Singapore has to do with its incredible utility for customers. Buyers are finding it lucrative to depend on BNPL for even smaller products, not just big-ticket items.
There is a myth that surrounds repayment through installments. The myth is that only people who cannot afford to pay in lump sum go for payment options like installments. Even though the purpose of adopting BNPL is to make products affordable for a wider audience, the truth is that even those buyers that can afford to pay $200 to $500(US) in lump sum, prefer paying in installments, if there is no interest and the payment process is hassle-free. The success of payment models like that of the lazada installment plan shines a light on this fact. People also adapt to BNPL because of reasons like preferring to settle all their monthly bills on a certain date or time, instead of paying as and when they make the purchase.
On top of that, BNPL is also proving to be a useful tool in reinforcing a habit of timely repayment in buyers. This can eventually be helpful to users in teaching them how they can better manage their money. It is certainly a skill that the younger generation can benefit from learning.
Classier than credit cards
BNPL is further emboldening the user to take credit with every purchase, without the use of credit cards. Credit cards as a financial tool never quite took off in Southeast Asia. However, BNPL is ultimately doing the same thing, but doing it more effectively by shrinking the credit-taking process to only a few clicks. BNPL is a true reflection of how shopping should be in the modern era. An era where a buyer gets an end-to-end shopping experience with absolutely zero hassles and no after-sale costs.
There is one crucial difference between credit cards and BNPL, which is that a credit card, essentially, connects the bank account of the buyer with that of the selling platform. It is because the credit card company is ultimately transferring money from a bank that has extended credit to the buyer. BNPL is different because it is 2-in-1; it is one entity that combines the role of the credit card company as well as of the bank. This allows new merchants to easily jump aboard, without any operational difficulties. It also means optimal management of the payment process, making it quick, easy, and reliable for users.
Contrary to the conventional belief that strategies such as BNPL may disrupt the budgetary planning of customers, it is proving to be quite a useful tool for many. There are some obvious risks for entities such as Lazada, that are boldly pursuing models like the lazada installment plan. However, high risks don’t necessarily make it a bad investment, as is indicated by the success that the platform has experienced since the adoption of BNPL.