1. Changing Consumer Preferences as a Result of COVID-19 and Growing E-commerce Adoption are the Driving Forces Behind BNPL Market in Malaysia.
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With a CAGR of 60.5% from 2019 to 2022, the Malaysian buy now pay later market is growing. The market is fueled by shifting customer preferences toward alternative payment mechanisms like BNPL, which the COVID-19 Pandemic brought about in order to encourage savings. Increased vendor acceptance and the growth of e-commerce transactions helped the nation’s BNPL market even more. In order to boost its uptake, Malaysian BNPL service providers have teamed with a number of e-commerce platforms. To boost their transaction volume, they continue to collaborate with e-commerce businesses while also focusing on other sectors like lifestyle, food, etc. Furthermore, BNPL Players were able to seize this chance and provide credit services because there was less credit penetration.
2. Consumer default risk, industry competition, a lack of BNPL-specific regulations, and credit rating verification all pose significant obstacles to Malaysia’s BNPL market’s growth.
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Issuers of BNPL services took on the risk of being unable to recoup loan amounts if customers failed to repay on time. Despite the carry forward fee being associated with the late amounts, it may continue to grow on the consumer’s end. However, the hazards associated with the local competitiveness are very substantial. The market is really cutthroat. Because there are just a few significant companies operating in the landscape, other players cannot operate in the market solely by enforcing their status as BNPL players. Additionally, the industry as a whole allows access to credit lines without any safeguards against consumer overspending, which inevitably results in debt traps and is neither overseen or supported by any financial regulator. Being able to entice people to spend more than they can afford makes it one of the key issues confronted. BNPL providers, however, rely on reliable identification verification networks, in-house credit scoring systems, and a robust consumer credit culture. On the other hand, growing personal debt is not well regarded.
3. The COVID-19 Pandemic, Rising Retail Adoption, Younger Population and Limited Access to Credit are Acting as Catalysts for Growth of BNPL Market in Malaysia.
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COVID-19 Pandemic promoted greater consumer acceptance of digital technology. Due to BNPL modifying how purchases are made even after COVID-19, customers are also becoming less price-sensitive. Additionally, the pandemic’s rapid e-commerce growth presents a significant opportunity because of the rise in online payments. This, together with the massive acceptance of BNPL giants in retail and the general population, is a key growth driver for the BNPL business in the region. Furthermore, the existence of tech-savvy, cost-conscious, and mobile-first consumers is a major factor in the rapid expansion of BNPL in Malaysia. A significant portion of Malaysia’s adult population is also underbanked or unbanked, giving them little credit choices. Thus, BNPL players have the chance to give customers access, particularly in industries with low credit availability and significant entry barriers.
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