BNPL outlook
In Japan, cash has been the king and remains the most favored payment method. However, over the last few years, the government has made several inroads to transform Japan into a more cashless society by investing significantly in the digital payments space. From cashless rebate programs to the introduction of QR code payment systems, the government encourages consumers to use digital payments.
According to PayNXT360’s Q4 2020 BNPL Survey, BNPL payment in the country is expected to grow by 134.0% on annual basis to reach US$ 10009.5 million in 2021.Medium to long term growth story of BNPL industry in Japan remains strong. The BNPL payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 38.1% during 2021-2028. The BNPL Gross Merchandise Value in the country will increase from US$ 4277.8 million in 2020 to reach US$ 95674.6 million by 2028.
This digital revolution in the payment sector has also helped the country's new and upcoming buy now, pay later (BNPL) payment services. As of late, millennials in Japan have been using BNPL widely. More than 25% of millennials users are using BNPL services for their e-commerce purchases. Additionally, the BNPL payment option has increased by more than 4.3% among millennials in Q1 2021. Therefore, the trend is representing the growing adoption of BNPL services and creating growth opportunities for BNPL players in Japan.
BNPL market opportunity and key drivers
In Japan, more than two-thirds of adults have a credit card. The country has the highest percentage of credit card adoption in Asia. However, the reason why consumers in Japan are quickly shifting to a more convenient and affordable payment option such as buy now, pay later is the ability to make higher-value purchases without incurring additional fees.
From the merchant point of view, the ability to improve the customer checkout process is driving the adoption of BNPL services in the country. For instance, by allowing customers to skip entering their credit card details and only inputting the contact information, e-tailers are creating an attractive and fast checkout process.
Rising credit card penetration in Japan presents an exciting market opportunity for BNPL providers in Japan. For avoiding excessive fees on credit card transactions, millennials are quickly shifting towards a more affordable credit service such as the BNPL option.
Apart from this, growth in the Japanese e-commerce industry is also supporting the adoption of the BNPL payment option. Several e-commerce players, including Amazon, are offering BNPL payment options to their customers in Japan. With the e-commerce industry expected to be valued at more than US$135 billion by 2024, the Japanese BNPL sector remains a lucrative one when it comes to investment and growth opportunities.
Key players in BNPL
Paidy, a Japanese Fintech firm, is one of the major and key players driving the growth of the BNPL segment. Launched in 2014, Paidy has grown significantly over the years and has become one of the newest unicorns in Japan after raising US$120 million in March 2021. The BNPL provider, which is valued at US$1.32 billion after the recent funding round, provides BNPL services to more than 700,000 online merchants in Japan.
Presently, more than five million users are using the BNPL services offered by Paidy. However, the company’s recent strategic partnership with PayPal is expected to strengthen Paidy’s user base in Japan further. The BNPL provider launched a new product known as Paidy Link in partnership with PayPal, thus allowing customers in Japan to make purchases from more than 29 million global merchants of PayPal. This strategic partnership between Paidy and PayPal will further boost the adoption of the BNPL payment option.
Apart from Paidy, Splitit is another BNPL provider in Japan. In January 2021, Splitit partnered with Google to push the BNPL services in the country. As a result of this partnership, consumers in Japan are now able to make installment payments for buying high-value Google products.
With the growing adoption of BNPL services in the country, #PayNXT360 expects several global BNPL providers, such as Affirm and #Afterpay, to launch their services in the Japanese market.
