Barriers To Limit Boom In Buy Now, Pay Later Services In SEA

Southeast Asia's booming e-commerce and young population will boost BNPL services and a range of factors including large costs and investments, funding constraints, as well as potential regulations, will hinder growth

Barriers To Limit Boom In Buy Now, Pay Later Services In SEA
Photo: Business News

Singapore, August 02, 2022 – Southeast Asia provides fertile ground for buy now and pay later (BNPL) companies to flourish despite barriers that could hinder growth, says Moody's Investors Service in a new report.

"The rising popularity of e-commerce in Southeast Asia will draw more shoppers to adopt BNPL as a payment option," says Tengfu Li, a Moody's Assistant Vice President and Analyst.

BNPL services allow consumers to pay for goods in interest-free installments and have expanded rapidly in the Association of South East Asian Nations (ASEAN) region, especially in the past two years amid the pandemic. Leading companies in the region include Kredivo, Akulaku, Atome and Hoolah.

"Moreover, ASEAN's large pool of consumers with limited access to banking services presents an opportunity for BNPL companies because their services are easy to use. Also, the region's large youth population actively shop online and are the primary users of BNPL services," adds Li.

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Potential pitfalls, however, would limit BNPL companies' growth. High expenses and investments on technology to achieve fast growth amid intense competition have resulted in hefty losses. In addition, the tightening of monetary policy globally will push up borrowing costs and cut household consumption power. And an increase in regulatory scrutiny could also hinder the sector's growth.

With these challenges to growth, Moody's is not expecting BNPL companies to pose a major threat to banks in ASEAN given their lack of scale and limited products.

Subscribers can access the report here