The ever-expanding buy now pay later ecosystem in Southeast Asia

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With relatively low financial inclusion and an even lower credit card penetration, buy now pay later has emerged as a preferred payment solution for many Southeast Asian consumers over the last two years. The BNPL adoption, driven by the global pandemic outbreak, has continued to grow at an accelerated pace. As a result, many of the leading internet companies in the Southeast Asian markets have entered the space to boost their revenue growth. Grab Holdings, Sea Ltd., and GoTo Group, are all providing their users with a BNPL payment solution to be used across different products and services.

Despite the economic challenges faced by BNPL providers globally, the payment method has continued to gain widespread adoption among consumers. With inflationary pressures and the subsequent surge in the cost of living having a severe impact on the monthly budget for many, BNPL has again gained rapid momentum in Southeast Asia. Amid the growing popularity and demand for flexible payment solutions, providers are forging strategic alliances to bring the payment method to more merchants and consumers in the region.

• In January 2023, GHL Systems, one of the leading payment solutions providers in the region, announced that the firm will roll out the BNPL service offered by Grab for its in-store merchants. In 2021, GHL Systems rolled out the service for online purchases in Malaysia. Through the extended collaboration, GHL system merchant partners will be able to provide Malaysians with a flexible payment solution for in-store purchases.

Many of the payment firms in the region have been seen forging strategic alliances with BNPL providers in Southeast Asia. This trend is projected to further continue as BNPL firms seek to expand their merchant network, thereby providing consumers with their preferred payment type at more merchants.

• In December 2022, Pine Labs, a merchant commerce omnichannel platform, announced that the firm has entered into a strategic partnership with 2C2P, a global payments platform. The partnership aims to expand the BNPL ecosystem in different Southeast Asian markets. The strategic alliance will cover Singapore, Malaysia, Indonesia, Hong Kong, the Philippines, and Thailand.

Unlike other BNPL solutions, Pine Labs works with partner banks enabling cardholders to make installment-based purchases without the need of downloading any mobile applications or subscribing to any mobile wallets. In collaboration with 2C2P, Pine Labs will enable customers to use the BNPL method at all of 2C2P's merchant partners in the six key Southeast Asian markets, thereby supporting the growth of the BNPL gross merchandise value and volume.

• In a similar strategic alliance, Airwallex announced that the firm had entered into a collaboration with Atome in November 2022. The strategic partnership will enable Airwallex merchants to introduce BNPL payment options for their shoppers in Indonesia, Malaysia, Singapore, and Hong Kong.
• This is the first time Airwallex had entered into a collaboration with BNPL providers, as it seeks to drive revenue and growth for its merchant network. Going forward, Airwallex is also planning to expand its collaboration with Atome in Japan, Thailand, and the Philippines.

In the Philippines, BNPL providers and digital banking firms are also entering into strategic collaborations to further accelerate BNPL gross merchandise value and volume, by onboarding more customers on the BNPL platform. For instance,

• In November 2022, CIMB Bank Philippines and SeaMoney entered into a strategic alliance to onboard 2.5 million customers on the SPayLater service in 2023. Through strategic collaboration, CIMB Bank is seeking to expand its loan portfolio and further accelerate its growth. In 2022, the digital bank disbursed PHP 25 billion to its borrowers. On the other hand, the collaboration with CIMB Bank will enable SeaMoney to scale its BNPL service at a rapid rate, amid the growing demand for a flexible solution among Filipinos.

All of these strategic collaborations to enable more merchants to offer BNPL payment options and to onboard more customers to a specific service has resulted in a fast-growing BNPL ecosystem in Southeast Asia. PayNXT360 expects the trend to further continue across the region, as demand for BNPL is projected to remain strong, among both customers as well as merchants from the short to medium-term perspective. The growing competitive landscape is also projected to drive venture capital and private equity funding in the Southeast Asian market over the next three to four years.

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