GlobalData: Online pay later solutions on the rise in Asia Pacific

A growing middle-class population, widespread smartphone adoption, and rising internet penetration are all set to drive the Asia Pacific ecommerce market from a value of USD 1.4tn in 2017 to over USD 2tn by 2020. 

The company reveals that per capita ecommerce spend in India and Indonesia stood at just USD 36.50 and USD 40.60 in 2017, respectively – compared to USD 2,270.70 in the US and USD 3,063.10 in the UK. 

Online pay later tools are gradually making their mark in Asian markets, with a number of payment service providers (PSPs) as well as online merchants offering the solution to online shoppers to allow them to pay for their purchases at a later date at no charge, though a late fee is charged if the agreed date is missed.

Shivani Gupta, Payments Analyst at GlobalData, comments: “The rise in consumer preference for deferred payment for online purchases mainly stems from the convenience and affordability it provides to pay at a later date. An increasing number of PSPs in the region have launched solutions that could be classified into two main categories. The first allows customers to pay cumulatively for all the purchases made over a period of a few weeks, while the second offers extended credit, allowing users to repay in bi-weekly instalments. This result in less frequent cart abandonment and increased online purchases.” 

The concept is now slowly gaining popularity across Asia Pacific, with countries like Australia and China being the early adopters. AfterPay and zipPay in Australia are now offering convenient credit financing options for a large proportion of online shoppers. Ant Financial, a subsidiary of China’s Alibaba Group, offers a similar service on online purchases made via its Alibaba website. 

In India, with credit card penetration at just 2.8 cards (per 100 inhabitants), and the limited availability of short-term credit, online pay-later tools provide significant growth prospects for the country’s e-commerce market. LazyPay – one of the initial benefactors of this payment service – is now a well-known brand offering pay-later options to more than 250,000 customers in collaboration with major online merchants, including Zomato, Swiggy, Foodpanda, Redbus, and Faasos. 

Other providers following suit include Simpl and ePaylater. In addition, leading online retailer Flipkart and cab aggregator Ola have introduced their own deferred payment solutions for loyal customers. More recently in November 2017, leading digital wallet Paytm forayed into this market in collaboration with ICICI Bank. 

While the overall business model remains similar across Asia Pacific, companies have set their own repayment terms and pricing policies in different markets. LazyPay in India generates invoices on the 1st and 16th of every month, to be paid within the next three days via online banking, debit, or credit card. AfterPay in Australia, on the other hand, offers an extended pay-later option with four equal instalments due every two weeks. The amount gets deducted automatically on the due date from a linked debit or credit card. 

New Zealand has also seen a spurt of PSPs, including PartPay, Oxipay, and Laybuy, offering similar services. PartPay allows customers to pay only 25% of the total purchase amount upfront and the remaining in three equal fortnightly instalments via debit or credit card. Charges are levied on customers only in the case of delayed payment. For instance, LazyPay charges up to 18% interest on the outstanding balance on a daily basis, while a flat fee of AUD 10 is charged in the case of AfterPay.

“With growing consumer spending and a rising appetite for short-term financing, the pay-later concept presents huge potential in Asian markets. However, its success will rely on greater merchant support, a focused campaign to generate consumer awareness, and a positive online customer experience with these solutions,” concludes Gupta.