BNPL User Counts Are Poised To Explode, So Lenders Must Differentiate Their Offerings

The upward trajectory of buy now, pay later loans shows no signs of leveling off. By 2027, the number of BNPL users globally is projected to more than double, surpassing 900 million, up from 360 million in 2020, according to Juniper Research. The growth will be driven in part by an anticipated economic downturn, which Juniper expects will increase the demand for low-cost credit solutions.

One country expected to undergo explosive growth in the number of BNPL users is India, which Juniper projects will have 116 million BNPL users in 2027, up from 25 million in 2022. Increasing e-commerce usage and a growing interest in international goods available through online retailers is expected to play a major role in fueling that growth, the report says. To manage the growth in India, the report recommends “that vendors build strategic partnerships with vendors in developing markets with established consumer bases, to successfully capitalize on this user growth and associated revenue.”

Another driver of BNPL growth is expected to be the adoption of virtual cards by BNPL providers. An example is Klarna AB, which issues a virtual card through Marqueta Inc., to help overcome growth limitations.

The primary advantage of offering virtual cards is that it allows BNPL lenders to compete with credit cards, particularly in-store, where single-use BNPL cards can be used within a digital wallet to complete contactless transactions, Juniper says. And because virtual cards are not tied to a specific merchant, consumers can use them at any merchant that accepts general-purpose credit cards. That in turn gives cardholders greater control over where and when they want to use BNPL for purchases, the report adds.

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

In addition to issuing virtual cards, other points of differentiation BNPL lenders can leverage include digital loyalty schemes and browser extensions that automatically facilitate BNPL payment services, the report says.

One advantage of a browser extension is that it allows BNPL lenders to give their customers an online-shopping experience as if they were shopping in-app. “Browser extensions are also an effective way of integrating cashback and loyalty rewards into their payment offerings. Most BNPL firms that offer a browser extension have virtual card capabilities integrated so that customers can use their BNPL accounts just as easily with retailers who do not directly offer the services, as those who do,” the report says.