Consumer spending using BNPL (buy now, pay later) platforms is expected to reach $437 billion globally in 2027, up from $112 billion in 2022, according to a new report from Juniper Research. This considerable growth of 291% will be driven by escalating financial pressures due to the rising cost of living, increasing the demand for cheap credit solutions.
BNPL programs allow consumers to pay using regular, interest-free installments, which is attractive to those who depend on credit for their purchases. Additionally, BNPL only requires soft credit checks; facilitating access to credit.
The debt trap requires regulation
The research revealed that the most significant problem currently facing the BNPL market is the debt trap. BNPL’s lack of credit checks poses a significant barrier to the market as consumers are approved for larger loans than they are actually able to repay. However, the report predicts that the introduction of financial regulations in several countries will help alleviate this problem.
These new regulations are similar in nature to existing credit services. In markets where regulations are more relaxed, it is still essential that providers act responsibly and clearly communicate all debts incurred promptly to users, in order to minimize default rates.
Research author Dominique Tetnowski explained: “While the future of the market does not appear clear given the plethora of impending regulatory changes, enforcement of eligibility checks legislation will ensure development market safely.”
Expansion into new vertical markets required
Research predicts that BNPL providers should seek to provide services in alternative verticals to diversify their monetization opportunities as e-commerce becomes oversaturated with solutions. He identified the healthcare sector as an emerging opportunity for vendors, due to a lower risk of default due to overspending compared to the e-commerce market.
As such, vendors should seek to establish strategic partnerships with established healthcare providers to offer BNPL services to healthcare users, thereby ensuring successful market entry.