A new study from Juniper Research has found that consumer spending using BNPL (Buy Now, Pay Later) platforms will reach $437 billion globally in 2027; rising from $112 billion in 2022. This sizeable growth of 291% will be driven by escalating financial pressures from the rising cost of living, increasing the demand for cheap credit solutions. buy now pay later no credit check

BNPL schemes allow consumers to pay using regular interest-free installments, which is attractive to those reliant on credit for purchases. Additionally, BNPL only requires soft credit checks; making it easier to access than credit.

The Debt Trap Necessitates Regulation

The research found that the most significant issue currently facing the BNPL market is the debt trap. BNPL’s lack of credit checks poses a considerable market hurdle, as consumers are being 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 issue. These new regulations are similar in nature to existing credit services. In markets where regulations are softer, it is still vital that vendors act responsibly and clearly communicate all incurred debts promptly to users, to help minimise repayment default rates.

Research author Dominique Tetnowski explained: “Though the future of the market seems unclear given the plethora of impending regulatory changes, enforcing legislation for eligibility checks will ensure the market develops securely.”

Digital BNPL & Virtual Cards buy now pay later no credit check

The development of virtual cards is of considerable importance for the future advancements within the BNPL market. Providing virtual cards completely removes the acceptance issue currently facing the BNPL market.

Figure 1: Klarna Virtual Card

Source: Klarna.com

With the use of a virtual card, all payments are accepted like a standard credit card. Cards are not tied to a specific merchant and can be used in a range of places, exactly like a traditional bank card. This gives consumers greater control over where they use their BNPL functionalities as they are able to use them wherever card payments are accepted. The merchant still receives the full payment amount and the customer pays their balance in installments; exactly as with digital BNPL.

The entire payment process is digital, with no need for a physical card, and features a wide range of options including credit cards, vouchers, and gift cards. BNPL virtual cards are mostly stored on a smartphone within a digital wallet. With BNPL vendors, the virtual card is linked to another card with which the consumer pays their BNPL account. With banks that offer BNPL payment options, the card is linked directly to their bank accounts. Additionally, banks and card issuers providing the payment option do not need to issue the user a new or additional card, as they have the advantage of existing infrastructure and cards in consumers’ mobile wallets.

India has the potential for rapid growth in BNPL, with users predicted to grow from 25 million in 2022 to 116 million by 2027. This is due to rising eCommerce usage and growing interest in international goods available through online retailers. In turn, it recommends that vendors build strategic partnerships with vendors in developing markets with established consumer bases to successfully capitalise on this user growth and associated revenue.

Figure 2: Total Digital BNPL Unique Users per annum (m), Split by 8 Key Regions, 2027: 900
Million

The adoption of virtual cards, where digital-only cards are used for purchases, will increase the usage of BNPL solutions, as they only require merchants to accept card payments – overcoming previous limitations on growth. The advancement of virtual cards allows BNPL schemes to compete with credit cards; particularly instore, where single-use BNPL cards can be used within a digital wallet to complete contactless transactions

Expansion into New Verticals Needed buy now pay later no credit check

The research predicts that BNPL vendors must look to provide services in alternative verticals to diversify their monetization opportunities as eCommerce becomes oversaturated with solutions. It identified the healthcare sector as an emerging opportunity for vendors, owing to a lower risk of defaulting payments from overspending in comparison to the eCommerce market. As such, vendors must look to make strategic partnerships with established healthcare providers to offer BNPL services to healthcare users, ensuring successful entry into the market.

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