The Buy Now Pay Later (BNPL) scene is heating up across the world. In the US, Square, one of the most established digital payment companies, is buying the Australian BNPL player, Afterpay for US$29bil. Here in Southeast Asia, Kredivo is preparing to go public via SPAC at a US$2.5bil valuation.  

For those that were still on the fence, it’s clearer now that young consumers are preferring BNPL to traditional credit services. Merchants are also embracing the services to use BNPL to increase conversion, basket sizes and customer acquisition. Both consumers and merchants are voting with their purse. 

And ecommerce players in Indonesia are strong use cases for BNPL players. In our MW Blooming ecommerce in Indonesia: Payment report  , we see that aside from Kredivo, Akulaku, Indodana, SPaylater and Ceria- are strong contenders in this space.

There are three types of players in the BNPL landscape.  

First, Kredivo, Akulaku, and indodana – Independent fintech focused players that can partner with any providers. They were the first movers into this BNPL market in the mid 2010s. In particular, we hear amongst our ecommerce community that Kredivo credit customers are very loyal, and keep coming back to use the product. 

Second, Shopee Paylater, and GoPay Later – Big tech players with an existing ecosystem and established user base. They are now building up their BNPL as a payment feature for their customers and merchants. 

Finally, traditional banks and multifinance companies are launching their own BNPL products. One strong example is Bank Rakyat Indonesia (BRI), one of the largest state owned banks in Indonesia launching it’s BNPL product – Ceria

And as you can see, the market is becoming very competitive.

How has the BNPL landscape been evolving? 

BRI’s Ceria and ShopeePayLater are part of the bigger banking and ecommerce ecosystems. They were late movers in this industry – only starting in 2019/2020  – and we expect to see significant growth.

Independent BNPL players are also evolving. Akulaku recently became the major shareholder of Bank Neo Commerce, one of the digital banks in Indonesia. It also has a credit agreement with GoJek-backed digital bank, Jago, to expand its financing distribution. 

Kredivo is expanding its product offerings, also rumoured to launch a digital bank called Lime sometime in 2021.

What does this mean? 

We had shared some insights on BNPL back in April. One of our Impulso community members had said “BNPL platforms need to be part of something to survive – I don’t think standalone ones make sense for the region.” 

And he is right. At the end of the day, BNPL, no matter how great the product is, will be another payment option for customers and merchants. They need to either build up their own ecosystem, or be part of a larger ecosystem – to make sense in the longer term.  

That would explain why Akulaku and Kredivo want to move into the digital bank space. It would also explain why Square share price went up 10% after the announcement that it was buying Afterpay.


Square Inc’s stock

There are still many opportunities for the picking, and many more risks brewing. We expect that there are many more late movers (i.e. banks, multifinance, tech companies, non-Indonesian BNPL players, and regulators) who are scrutinising this space and pondering their next steps. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].