BNPL competition in Southeast Asia heats up

Written by Kapronasia || April 08 2021

The buy now, pay later frenzy is moving from the advanced economies into emerging markets with Southeast Asia a hotspot. Given the rapid growth of fintech in the region and lack of credit card penetration in most countries it is relatively easy for BNPL to make inroads. In fact, BNPL is proving so popular that the segment is growing fast in Singapore too, where credit card penetration is 73%.

At least eight firms are offering BNPL products in Singapore or will soon, according to Tech In Asia: Atome, Grab, hoolah, OctiFi, Pace, Pine Labs, Rely and Split. The novelty of interest-free installment payments is helping these companies attract BNPL customers, along with the usual subsidies. Rely, for instance, has been offering S$20 cashback for first-time users.

A recent report by the U.S. financial firm FIS found that BNPL is the fastest-growing online payment method in Singapore. Currently accounting for just 3% of the market, it is forecast to reach 13% by 2024. The companies earn revenue by taking a 4 to 6% transaction fee that is charged to the merchant. Merchants are willing to pay the fee because BNPL helps them increase sales. Like in other developed markets, most Singaporean BNPL users are 18-35 years old.

Singaporean-based BNPL firms are hoping to use the city-state as a jump-off point for other markets in the region. Atome has already expanded across Southeast Asia as well as mainland China and Hong Kong. Hoolah is available in Hong Kong and Malaysia. Pace is present in Hong Kong, Thailand and Malaysia.

India's Pine Labs also has regional ambitions. It is already present in Malaysia, the Philippines and Thailand and plans to expand to Singapore, Indonesia and Vietnam.

For now, the BNPL market in Southeast Asia is highly fragmented and the race is wide open, with no clear leaders. Yet over time, firms with the strongest digital services ecosystems could pull ahead of those who simply offer a few BNPL products. Consider Grab. It is easy enough for the company to add BNPL to its existing e-wallet. Gojek and Sea can do the same. All of these companies will eventually have digital banks as well.

Under that scenario, use of subsidies will intensify to attract users. The firms with the deepest pockets will be better positioned to win market share.

To stay competitive, BNPL startups will partner with incumbent banks. Pace said it has partnered with OCBC to offer its BNPL service to the bank’s debit cardholders, while Razer's fintech arm Razer is teaming up with Rely to provide BNPL services in Southeast Asia.

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