The global market for Buy Now Pay Later (BNPL) services is set to experience exponential growth in the coming years. With the number of BNPL users projected to reach close to one billion by 2027, it is evident that BNPL providers are poised to benefit from this increasing adoption. This article delves into the current state of the BNPL market, its potential for growth, popular product categories, user demographics, and the leading providers in the field.
- BNPL Adoption and Growth: The BNPL market is projected to quadruple between 2022 and 2027, reflecting the growing number of users embracing this payment option. Klarna, Afterpay, and Affirm are the top three BNPL providers, collectively holding a market share of around 80%. These companies experienced significant user growth during the peak of the pandemic, driven by the shift towards digital shopping and payment habits. While the growth rate has slowed down post-pandemic, it remains positive, indicating the sustained appeal of BNPL.
- Current Usage Levels: Despite gaining popularity, BNPL is not yet the go-to payment option for most users. Across regions, BNPL ranks low in terms of payment methods used at least five times per month. Europe, Asia-Pacific, and North America all exhibit single-digit percentages of users using BNPL frequently. However, this leaves ample room for future growth, highlighting the potential for increased adoption.
- Popular Product Categories: Among various countries, “major appliances” emerge as the most purchased product category using BNPL services. In the U.K. and the U.S., close to half of surveyed adults have used BNPL for major appliance purchases. “Electronics” and “home furnishings” follow closely as popular choices for users to leverage BNPL, enabling them to split or delay payments for costlier items.
- Projected Market Growth: The global BNPL market is expected to witness a declining growth rate post-pandemic, although it will still exhibit a mid-range double-digit compound annual growth rate (CAGR) between 2022 and 2027. Projections suggest that the market size could approach half a billion USD within five years. While the growth rate may taper, BNPL remains an integral part of the e-commerce payment landscape.
- User Demographics: Gen Z and Millennials currently dominate BNPL adoption, with Gen Z leading the way in the U.S. Nearly two-thirds of digital buyers using BNPL in 2022 belonged to Gen Z, and this trend is expected to continue until 2026. Additionally, almost half of online shoppers from the Millennial generation utilized BNPL services in 2022. Interestingly, older generations such as Gen X and Baby Boomers are projected to show significant growth in BNPL user penetration, indicating potential future adoption.
- Leading BNPL Providers: Klarna, Afterpay, and Affirm are the top three BNPL providers, commanding a significant market share. Klarna boasts the highest number of users among the three, with a steady increase over the years. Afterpay has shown consistent user growth, doubling its user base each year until 2022. As of March 2023, Klarna held almost half of the global BNPL market, while the combined market share of Klarna, Afterpay, and Affirm surpassed three-quarters, cementing their leadership positions.
Conclusion: The BNPL market is witnessing substantial growth and is expected to continue its upward trajectory. While BNPL is not the most frequently used payment option, its popularity is steadily increasing. Major appliance purchases, followed by electronics and home furnishings, are the most common categories where consumers utilize BNPL services. Gen Z and Millennials are the current frontrunners in BNPL adoption, with older generations showing potential for future growth. Klarna, Afterpay, and Affirm remain at the forefront of the BNPL market, dominating the industry with their innovative offerings.
As BNPL gains wider acceptance and evolves to meet consumer needs, it is clear that this payment option is here to stay, revolutionizing the way people shop and pay for products and services.
