Buy now pay later space to surpass $1 trillion by 2030

With big tech companies and leading payment providers set to take over the buy now pay later (BNPL) sector, as spearheaded by Apple’s Apple Pay Later offering, GlobalData expects the market to surpass $1 trillion by 2030.

High demand for BNPL services by both merchants and customers will make it popular with both big tech and large payments providers, with companies such as Apple, Google, Mastercard, PayPal, and Visa set to be leading players in the market by 2030.

Maddy Irwin, Thematic Analyst at GlobalData, comments: “Big Tech and large payment providers can seamlessly incorporate BNPL into their platforms whether they’re profitable or not forcing FinTechs with unsustainable revenue models out of the market.”

“For Visa and Apple, BNPL does not need to be profitable and is merely an incentive to keep existing customers in their ecosystems.”

Apple

Apple has taken the lead with Apple Pay Later launched in September, and GlobalData reckons it will be one of the biggest players by 2030.

Irwin comments: “Apple is likely to have a competitive advantage over other BNPL providers, as it will be easy for existing Apple Pay and Apple Wallet users to adopt these services. Further, Apple has a huge existing user base.”

Covid-19 and cost of living crisis

The growing demand for BNPL services followed an online shopping boom during the Covid-19 pandemic and is now being driven by the need for payment flexibility in light of the current economic situation.

Irwin continues: “BNPL has longevity due to strong customer demand. It is being used by many to help deal with the rising cost of living and to alleviate anxiety around personal finance.”

“Spreading the cost of payments is an attractive option for consumers amid a period of rising inflation, and BNPL is also convenient for merchants as the lending provider is taking on the risk of default.”

Greater transparency needed

GlobalData also notes that part of the reason the BNPL sector has been able to grow rapidly is due to a lack of regulation.

However, governing bodies are now reviewing the sector and considering imposing rules to protect consumers from accumulating unmanageable debt.

BNPL is already facing increasing regulatory scrutiny from the likes of the FCA. Providers may need to charge interest and undertake affordability checks on customers.

Irwin concludes: “By 2030, regulatory bodies will have ironed out the murky BNPL sector, clamping down on the need for transparency and rigorous credit checks. Its poor reputation will improve as a stronger framework is set in place.”

“Greater transparency is needed to ensure that customers understand that they are accruing debt through BNPL services, which can negatively affect their credit scores. This is especially relevant given the effect of the rising cost of living, where BNPL is expanding beyond retail and encompasses everyday expenses.”