Food tech companies plunging into the BNPL space to increase order value

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The mode of payment that gained prominence over the last four to eight quarters is buy now, pay later (BNPL). Most of the sectors such as travel and accommodation, electronics, clothing, and footwear have already plunged into the BNPL space; now, food delivery start-ups are setting their foot into the space to increase market share. For instance, 

• In February 2022, one of the leading food delivery companies in India, Zomato announced to launch BNPL services for its customers by setting up a non-banking financial company (NBFC). Particularly, Zomato will provide short-term credit to the delivery partners and restaurants through the NBFC. In the meantime, the company will collaborate with other NBFCs to offer the pay later payment facility for its customers. Zomato, which has a network of nearly 390,000 restaurants and 32 million monthly active users, is likely to gain more market share from the new BNPL payment option.
• On the other hand, another leading food delivery company Swiggy, too entered the space with the announcement of the launch of its BNPL services in February 2022. With around 128,000 restaurants across 500 Indian towns and cities with nearly 20 million monthly active users, the company is vying to get a piece of this fast-growing market.

Moreover, the average order value increased significantly in the last eight quarters with changing consumer buying behavior due to work from home and restrictions in people's movement. According to PayNXT360's Q4 2021 BNPL Market Survey, the average order value of a food tech firm was between Rs. 280 to Rs. 450 in India. Consequently, BNPL will enable these food tech companies to increase the order value, generating revenue in the medium to long term perspective.  

Apart from enhancement of convenience, increment of the order value is the underlying reason behind the launch of this service by the food tech companies. With all the sectors plunging into the BNPL space, the market share of this payment mode has already reached 3.5% in the online payments space, and it is poised to reach nearly 10% by 2025.

Through the launch of deferred payments, the food tech start-ups are also targeting India's unbanked and under-banked population. Moreover, consumers without credit cards or who have no plan to use credit cards will conveniently access this service. 

The trend is also spreading across other Asia Pacific countries.  For instance,

• In November 2021, Bangladeshi fintech, Pathao, launched the BNPL feature for its ride-hailing, food delivery, and logistics services for its consumers.
• Notably, Pathao Food will allow its users with the 'Pay Later' facility to complete their orders with the initial spending limit being Tk 2,000 (~US$23).
• The company allows repayment using any digital payment method within 30 days, and this feature is available to the loyal customers of Pathao Food determined by the company's data and analytics engine.

The population mix of Bangladesh is dominated by millennials and Gen Z, and this has attracted fintech firms to introduce BNPL in their business models. Moreover, less than 5% of the population has access to credit cards, making it a lucrative market opportunity for firms to introduce BNPL features. Therefore, businesses are entering into partnerships with financial institutions to introduce new opportunities in the digital credit landscape.

To know more and gain a deeper understanding of the BNPL industry in Asia Pacific, click here.