‘Buy now, pay later’ is not dead

Image credit: Timmy Loen

Two of the region’s largest ecommerce players are doubling down on “buy now, pay later” (BNPL) services, even as this short-term financing product is undergoing a reckoning.

Indonesian tech company GoTo said on March 19 that it is preparing to launch a BNPL product with social media platform TikTok, months after it struck a deal to merge its ecommerce unit Tokopedia with TikTok Shop.

Do these two companies know something about the sector that other players don’t?

BNPL firms are faltering, throwing the relevance of the service into question. Yet, a select few operators of large marketplaces could find value in ramping up the offering within their ecosystems.

Diverging paths

Billed as one of the hottest opportunities during the pandemic-induced tech boom, BNPL has lost its luster.

Singapore startup Pace filed to wind up its business in August 2023, even after it acquired the assets of competitor Rely to increase its market share. Australia-listed BNPL player Zip exited the Singapore market the same year.

Customer rewards platform ShopBack in March discontinued its service PayLater, which it had launched after acquiring BNPL player Hoolah in November 2021.

Word on the street was that Hoolah was running out of cash before ShopBack bought the startup. As the economy soured, dampened consumer demand and the persistently high cost of funds meant even ShopBack could not keep it alive for much longer.

Amid this turmoil, however, TikTok was planning to use BNPL to drive purchases by letting users pay for their orders over a few months instead of upfront – and typically with zero interest.

Last July, TikTok announced a partnership with fintech startup Atome to offer installment payment options on its ecommerce platform in Malaysia.

TikTok’s collaboration with Indonesia appears to be a continuation of that strategy, and rival platforms are doing the same.

GoTo Financial head Thomas Husted said the fintech unit wants to be the preferred partner of TikTok Shop. At the same time, GoTo is planning to deepen its consumer loan offerings on its own app.

Sea’s ecommerce arm Shopee plans to expand its BNPL service to all users, while raising the credit limit of existing customers. The company made the decision after finding that younger users – 32 years old and below – often abandoned their shopping carts because the items were above their budgets.

Marketplace opportunity