The buy-now-pay-later (BNPL) market is predicted to reach $3.98trn (£3.06trn) by 2030, presenting opportunities for peer-to-peer lenders and other fintechs.
A new report from cloud banking platform Mambu and accountancy giant Deloitte has forecasted the market to grow by a compound annual growth rate of 45.7 per cent.
Former P2P lenders Funding Circle and Fellow Finance already offer their own products and P2P lenders-turned-digital bank Zopa is set to introduce its own BNPL offering soon.
The ‘Deloitte and Mambu Guide to BNPL’ found that consumer demand for convenience and affordability is one of three factors driving growth. Recent data from Deloitte has showed that over half of consumers (56 per cent) consider the ability to test a product before making a payment as a key driver for using BNPL.
The report cited other growth factors, such as widespread merchant adoption and accelerated market traction during the pandemic.
The guide said that businesses looking to develop a BNPL solution in the competitive environment must have a value proposition that meets customers’ needs and technology and data that enable them to make real-time decisions and deliver customer experiences.
The report said businesses also need a risk framework that provides a competitive edge, invest in talent and build their brand before going-to-market.
“Our report with Deloitte defines what BNPL success looks like and the practical steps financial and non-financial brands need to take in order to capitalise on the market opportunity,” said Kunal Galav, regional director, EMEA advisory at Mambu.
“With fintechs already directing billions of revenue away from banks via BNPL services in recent years, incumbent players risk losing out if they fail to act now.
“BNPL will continue to erode unsecured retail lending post-pandemic, so it’s vital that financial institutions think strategically about if and how they decide to play a role in this new business line – we hope this guide will enable them to do just that.”
Read more: P2P firms expand into BNPL products
“BNPL is now a key sales and conversion driver for retailers and ecommerce providers,” said João Caldeira, partner at Deloitte.
“Merchants, if they have not done so already, are looking around for an embedded finance solution that can help them design BNPL experiences at speed and at low-cost.
“The bottom line is that it’s a new revenue driver and having the ability to quickly add seamless instalment-based payments at the point of decision can change a business.”