BUY NOW PAY LATER: THE

FUTURE OF ECOMMERCE

Whitepaper

www.juniperresearch.com
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
1.1 Introduction
This whitepaper will analyse how the concept of BNPL (Buy Now Pay
Later) has emerged, and what this means for the wider eCommerce
market. Within this context, BNPL’s unique value proposition and
business model will also be evaluated; underlining its benefits and
challenges from both the customer and merchant points of view,
concluded with a forecast summary for BNPL spend in 2026.
1.2 Digital BNPL: Key Drivers & Challenges
Digital BNPL is aimed at capturing the same benefits as offline repayment
schemes; greater transparency and flexibility in payments for customers,
without the financial restrictions imposed by credit cards or personal
loans. However, unlike in the past, customer uptake is significantly higher
when compared to acquiring a credit or a store card, which have typically
been limited as solutions. Furthermore, merchants as providers are much
more active in participating in digital BNPL ecosystem solutions too. This
is thanks to digital BNPL’s unique value proposition, which potentially
yields greater benefits for both customers and merchants.
1.2.1 The BNPL Value Proposition & Business Model
i. UVP (Unique Value Proposition)
Analysed from an eCommerce perspective, digital BNPL’s UVP is
multi-fold:
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• Accessibility: Integration of digital BNPL to eCommerce checkout
processes, especially into mobile apps, translates into far-reaching
accessibility and widen the service’s customer base.
• Customer Experience: By utilising embedded finance and alternative
underwriting options, digital BNPL ensures smoother transactions at the
checkout eliminating the risk of cart abandonment. Moreover, BNPL
options are introduced to the customer on the landing page and/or
when browsing, which can simplify purchase decisions based on more
seamless and faster checkout expectations.
• Control: Digital BNPL options can be regarded as a revolving
microcredit, subject to soft credit checks and influenced by payment
patterns. Therefore, customers are able to control their budgets by
making timely payments and gradually build up their credit for
higher-value purchases, which also can be split into smaller
instalments. There is greater clarity on repayment schedules and terms
which are essential for risk-averse younger users.
ii. Business Model
Digital BNPL creates a hybrid financial ecosystem by linking online and
offline merchants (ie through in-store QR code payment options), credit
card providers, and social eCommerce platforms such as Instagram and
TikTok for in-app purchases through targeted promotions. Instead of
being a sole intermediary, it proactively shapes eCommerce retail trends
and directly responds to the needs of both merchants and customers.
By emphasising monetisation without over-charging merchants and
offering low-interest or interest-free credit to customers, digital BNPL
vendors have positioned themselves as a viable alternative to credit
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
cards. Digital BNPL providers pay attention to addressing each actor’s
specific needs in the ecosystem. In doing so, these providers move into
the gap generated by credit cards through converting a transactional
relationship dynamic into a co-creative growth one, referred to as a
virtuous cycle.
1.2.2 Benefits of Digital BNPL
BNPL services offer benefits to both customers and merchants, which will
both be explored here.
i. Customer View
• Ease of Use: When using digital BNPL options, customers are
presented with two checkout options; shopping and paying in-app, or
through a merchant’s app or website to complete their purchases.
Customers, especially those belonging to younger generations, actively
seek a simpler way of checking out. Digital BNPL providers utilise
pre-existing BNPL accounts to smooth this process, with details being
auto filled for example.
• Low-risk Money Management: Spreading the cost over time is more
than a simple psychological phenomenon; many customers actively opt
to use BNPL as a budget-management tool; crediting transparency and
real-time monitoring of spending. Budget management resonates with
the biggest customer segment of digital BNPL, millennials. Despite
having credit cards, an increasing number of customers in this segment
deploy BNPL, as they can offer better clarity on interest rates and late
fees to be incurred.
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• Loyalty/Rewards Schemes: Customers reap the benefits of the virtuous
cycle created by digital BNPL not only by accessing a vast merchant
resource, but also by getting rewarded for their loyalty and making
timely repayments. One such example is Afterpay’s rewards
programme, in which members can enjoy more flexible payment
options and more credit if they commit to making more frequent
purchases with the provider and repaying without defaults.
• Returns and Refunds: Refunds and returns constitute an important pain
point in all customer journeys, which only exacerbated with the rise of
online shopping. When using digital BNPL, customers have the option
to return their purchase without having to commit to pay the full cost
upfront. Customers are also assisted in refund processes wherever
disputes with merchants arise on purchases made via digital BNPL.
ii. Merchant View
• Low-cost Customer Acquisition and Better Competitiveness: Digital
BNPL providers actively promote their offerings to merchants as a
marketing service to acquire more customers. Given the presence and
marketing strategies of these providers, coupled with their accessibility
to multitudes of users and convenience around use, merchants gain
increasing visibility, which then translates into more customer traffic into
business. For example, PayPal offers its BNPL at no additional cost to
the merchant, whereas another provider, Laybuy, only charges
merchants a transaction fee with every purchase made using its
service. Furthermore, although most of their partnerships are built with
large eCommerce retail companies, digital BNPL providers have started
to extend their offerings to SMEs. What this extension could potentially
mean is not only a larger customer base, but also better
competitiveness, by reducing customer acquisition costs for smaller
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
retailers. Ultimately, implementing a widely used payment system will
be essential to boosting sales, specifically during the aftermath of the
COVID-19 pandemic.
• Conversion Rate and Sales Boost: Many BNPL vendors claim a high
level of ROI (return on investment) as they can increase the AOV
(average order value), which makes the business case for deploying
solutions very simple to justify.
Customers are also less likely to abandon their carts when presented a
frictionless experience at the checkout. Therefore, for merchants,
investing in digital BNPL may be likened to investing in a CRM system
with extensive benefits.
• Better Customer Loyalty: A seamless customer experience powered by
digital BNPL options is likely to lead to more recurring customers. At the
core of the digital BNPL premise lies getting repeat customers, both
individuals and merchants, through making the shopping experience
frictionless at the shopping cart and affordable.
1.2.3 Challenges of Digital BNPL
i. Customer View
• Debt: In essence, the products offered by digital BNPL are one-click
small personal loans. Customers who are new to the financing options
and are unaware of the terms and conditions involving taking out loans
can be negatively impacted depending on the digital BNPL platform due
to late payments and/or payment defaults.
• Security: Security when shopping online is a serious concern in
adoption of online payment methods across all customer age groups.
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Accompanying customers’ search for safer and more convenient
methods for online checkouts, digital BNPL providers will likely need to
strengthen their onboarding processes and adopt more advanced KYC
(Know Your Customer) checks, use AI deployment efficiently and be
more transparent about their handling of user data.
ii. Merchant View
• Credibility: Merchants offering digital BNPL might come under
increasing pressure for offering unsecured lending to their customers.
Providing responsible underwriting services are at the discretion of the
BNPL providers, however, merchants may also suffer from damages to
their credibility and reputation if they cannot manage the risk involving
financial behaviour of more volatile groups of customers.
1.2.4 Conclusion
Ultimately, digital BNPL will sustain its growth trend by diversifying and
adding on its customer base over time. While the model’s uptake is
cross-generational, it is increasingly appealing to younger millennials and
Gen Z, a group who could potentially struggle to obtain credit cards due
to thin credit files.
Challenges for the sector are beckoning however. The digital BNPL
industry is currently largely a self-regulating one. Fears around the
potential growth of unsecured lending and debt spirals, which were at the
centre in the 2008’s Financial Crisis, repeating itself are causing
concerns. Regulations, such as those being pursued by the UK FCA, are
likely to have an impact on the market, although it is unlikely that these
changes will make the model unviable, rather they will set it up on a more
sustainable footing.
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
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Figure 3: Total Digital BNPL & Flexible Credit Transaction Value

($m), Split by 8 Key Regions, 2026 - $995 Billion
1.3 Forecast Summary: Total Buy Now Pay Later
Spending
Spending via buy now pay later services, which are integrated within
eCommerce checkout options, including fixed instalment plans and
flexible credit accounts, will reach $995 billion in 2026, from $266 billion
in 2021. This 274% growth will be fuelled by a greater appetite from users
for credit to spread costs, particularly in the wake of the pandemic, which
has put extreme pressure on user finances.

• While regulations will inevitably place restrictions on services, such as

limiting charges or enforcing affordability checks, these changes will not
diminish the appeal or growth of the platforms, merely placing them on
a more secure footing. Vendors must focus on improving the
transparency and use of credit assessment and reporting now to
minimise future disruption.

• By 2026, buy now pay later services will account for over 24% of global
eCommerce transactions for physical goods by value, from just 9% in North America Latin America West Europe
2021.
Central & East Europe Far East & China Indian Subcontinent
• The global number of buy now pay later users will exceed 1.5 billion in
Rest of Asia Pacific Africa & Middle East
2026, from 340 million in 2021. In turn, eCommerce merchants must
integrate buy now pay later services immediately, or risk losing
transactions to other payment platforms which offer preferable payment Source: Juniper Research

options.
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
Order the Full Research
Juniper Research’s brand-new Buy Now Pay Later research features
extensive forecasts and an in-depth assessment of the opportunities
present in this rapidly growing market. Discover the success of buy now
pay later services to date, plus the future outlook for the evolution and
adoption of buy now pay later services, supported by extensive analysis
of regulatory frameworks. With a thorough delve into the benefits and
challenges of using buy now pay later services, the report analyses 15
leading buy now pay later vendors via a Juniper Research Leaderboard.
Key Features
• Buy Now Pay Later Sector Dynamics: Analysis of key trends
and primary challenges across the buy now pay later space,
including the following elements:
o The growth of eCommerce and the drivers of buy now
pay later growth
o Consumer behaviour in the wake of the pandemic
o How regulation will shape the future of the buy now pay
later market
• Buy Now Pay Later Regulatory Assessment: Specific
assessment of how regulatory landscapes are evolving in the
buy now pay later space, with the frameworks across 18
separate key countries analysed for current rules and anticipated
future impacts.
5
• Juniper Research Buy Now Pay Later Leaderboard: 15 key
buy now pay later vendors positioned on the Juniper Research
Leaderboard; accompanied by heatmap-based scoring and
individual player analysis. Vendors covered include:
o Klarna
o PayPal
o Quadpay
o Sezzle
o Zilch
• Benchmark Industry Forecasts: Forecasts sizing markets up
to 2026 for buy now pay later usage, transaction volume,
transaction value and platform revenue, split by instalment buy
now pay later services and flexible credit services, as well as by
online vs mobile, and by our 8 key regions and by 25 countries.
What’s in this Research?
1. Market Trends & Opportunities: Detailed analysis and strategic
recommendations for understanding the buy now pay later market,
including evaluation of the trends and regulation influencing the
growth of buy now pay later solutions. This also includes analysis of
important areas, such as regulatory frameworks, key challenges and
a future outlook.
2. Juniper Research Leaderboard Analysis: Insightful evaluation of
15 key buy now pay later vendors via a Juniper Research
Leaderboard; accompanied by a heatmap analysis and a thorough
BUY NOW PAY LATER: THE FUTURE OF ECOMMERCE
6

assessment of each individual vendor on their product range,

strengths and weaknesses.

3. Interactive Forecast Excel: Highly granular dataset comprising over

15,000 datapoints; allied to regional and sector analysis tools.
Includes regional and key country-level analysis, together with 5-year
forecasts for the buy now pay later market, including buy now pay
later usage, transaction volume, transaction value and platform
revenue, split by instalment buy now pay later services and flexible
credit services, as well as by online vs mobile.

4. harvest Online Data Platform: Visualises all the data in easy to use
and exportable graphs, tables and charts, and features continuous
data updates for 12 months.

Publication Details

Publication date: June 2021

Author: Damla Sat and Nick Maynard

Contact: For more information contact info@juniperresearch.com

Juniper Research Ltd, 9 Cedarwood, Chineham Park, Basingstoke,

Hampshire, RG24 8WD UK

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