All sectors have had to adapt to certain market dynamics. Disruption is everywhere, and the pandemic has accelerated disruption in most sectors. In this blog, we will touch on the three sectors that are attracting a lot of investment because of the technological advancements that they have made – giving rise to products and services that are tailored to better suit its consumers.
Buy Now Pay Later (BNPL)
BNPL is a subset of the vast digital payments sector, where technology has enabled the delivery of financial services. Fun fact: digital banks and employ more software engineers than business professionals. The BNPL sector is always much debated. From its early days, it has always managed to attract attention – both positive and negative.
What BNPL has done is enabled consumers to buy goods and services on a line of credit without paying any interest. But somebody has to pay the interest, right? Yes! The cost here is passed on to merchants and they pay a commission between 3% – 5%. While players in this space are not running a credit check, they do charge a late fee and do not allow customers to use their service until the debt has been cleared off.
While the so called “experts” argue over how the entire sector is just a scam and it will crash, the very players that BNPL disrupted, credit cards, have also entered into the zero-interest BNPL space – either directly offering such options on the cards or by partnering with players such as Splitit and leveraging their technology to provide the zero-interest payment option. The move by traditional credit card companies to enter this space is arguably the biggest boost the sector has received in terms of sustainability.
At the end of 2019, the global BNPL market was valued at over $7 billion. It is forecasted to grow at 21% annually into a $33 billion market by 2027. The sector is forecasted to grow into with the growth of e-commerce across the world. Another complementing data point is the decrease in the use of credit cards and increase in the use of BNPL. The RBA reports that the BNPL market now leads the market for credit cards by approximately $400m. The flexibility that BNPL provided and the high adoption rates seen in consumers forecast these numbers to not go anywhere but higher.