Buy Now, Pray Later: Solving for Commercial Sustainability in Asia Pacific’s BNPL Industry

The report, titled Buy Now, Pray Later: Solving for Commercial Sustainability in Asia Pacific’s BNPL Industry, looks in detail at the challenges facing Buy Now Pay Later (“BNPL”) companies in APAC around commercial sustainability, how existing players can optimise their strategies and operations to solve for profitability, and how incumbent providers can capitalise on the BNPL opportunity in the region.
Share Report

Table of Contents



CEO & Managing Partner

BCom (Hons 1) LLB (Hons), Macquarie University


CFA Engagement Manager

MA (Cantab), University of Cambridge MSc, Imperial College London CFA



BEcon&Fin (Hons), University of Hong Kong

Executive Summery

Buoyed by years of robust economic growth and booming household consumption, the AsiaPacific (“APAC”) region has seen rapid growth in the consumer finance market, with total consumer finance loan volumes reaching USD 5.4 trillion in 2021.

Despite strong demand, traditional consumer finance products – such as personal loans and credit cards – have faced heightened criticism from consumers and merchants alike, exhibiting problems such as high interest charges / fees and static conversion rates, respectively. Recognising these pain points, numerous alternative consumer finance solutions have emerged in recent years – the most notable one being Buy Now Pay Later (“BNPL”).

Unlike traditional consumer finance products that monetise consumers through fees and interest charges, BNPL firms primarily monetise merchant partners by charging them a merchant discount rate (“MDR”) to facilitate credit-enabled transactions. In doing so, consumers are given access to better financing and repayment terms without the need to pay interest. And regional demand for BNPL solutions is skyrocketing as a result, with total gross merchandise value (“GMV”) forecast to grow by a CAGR of over 39% from 2022-25, reaching USD 361 billion.

Nonetheless, BNPL firms currently face a plethora of challenges on several fronts, including unsustainable customer / merchant acquisition costs, NPLs, and funding costs, as well as low user retention rates. As such, most BNPLs are struggling to turn a profit, with even the largest players in developed markets (both in APAC and the West) making sizeable losses.

In fact, we estimate that the largest BNPL firms are currently running average profit margins of -15% p.a., with more nascent players operating in emerging markets suffering from profit margins of -100% p.a. Investors are voting with their feet, with share prices of listed BNPL firms being battered in 2021.

We believe that the BNPL model, as it stands today, is in need of a fundamental rethink, and see three key routes that firms must explore to carve out a path to long-term profitability: (1) optimisation (i.e. enhancing processes across the user journey and adopting alternative funding models); (2) integration (i.e. expanding vertically across the consumer value chain to enhance user retention and drive profitability); and (3) expansion (i.e. leveraging existing credit capabilities to tap into additional revenue streams, including alternative credit products and/or B2B technology solutions).

We see significant upside potential for BNPL firms that can successfully transform their strategies and operating models. For BNPLs operating in developed APAC markets, we see a 30% uplift in revenue and 20% reduction in costs as achievable targets within a three-year timeframe. For BNPLs operating in emerging Asia, we see a corresponding revenue uplift and cost reduction of 45% and 15% respectively, over the same period.

Unless major changes are made, we anticipate that most BNPL providers in the region will continue wearing losses indefinitely and forecast combined market losses to reach USD 5.2 billion by the end of 2025, based on the industry’s current P&L trajectory.

While we envisage a more sanguine future ahead for BNPL firms that can rapidly adapt their business models, it is going to be a case of Buy Now, Pray Later, for those who fail to get it right.


APAC consumer finance dynamics


The APAC consumer finance market has grown rapidly in recent years, with total consumer finance loan volumes increasing at a CAGR of 12% from USD 2.7 trillion in 2015 to USD 5.4 trillion in 2021 (see Figure 1).

Figure 1: APAC Consumer Finance Market Size (USD Billion)

Source: Euromonitor, Quinlan & Associates estimates

Economic Growth

Rapid economic growth results in a more confident population that is willing to purchase on credit

Growing Middle Class

Individuals with rising status borrow to finance purchases to align with higher living standards

Rising Internet Penetration

Strong internet coverage enables delivery of credit products in a scalable manner

New Product Development

Credit providers are developing new products to address nuanced needs of the local populace

From a geographic perspective, much of this growth has been fuelled by China and ASEAN, reflecting: (1) strong economic growth; (2) a booming middle-class; (3) rapidly rising internet penetration rates; and (4) the launch of new consumer finance products.

Consumer & Merchant Pain Points

Despite strong historical demand, traditional consumer finance products, including unsecured personal loans and credit cards, have drawn increased criticism and negative publicity in recent years. The two key stakeholder groups – consumers (especially the younger generation) and merchants – have expressed discontent towards existing consumer finance products for a variety of reasons (see Figure 2).

Figure 2: Consumer & Merchant Pain Points

Source: Quinlan & Associates analysis

For consumers, adoption barriers start at the application stage, which typically requires individuals to visit physical branches to submit a range of documents (e.g. employment, income, and address proof, etc.). The review of these largely paper-based documents is extremely inefficient and may take days, if not weeks, to complete. Rejection rates are also high, especially amongst less affluent customers, given their riskier credit profiles. Even if / when applications are approved, consumers must contend with high interest rates and a range of hidden fees and charges, which worsen considerably if they are unable to meet their monthly repayment obligations.

On the merchant front, traditional consumer finance products rarely lead to revenue uplift, as many of these credit products are designed to drive neither conversion rates nor order values. Given the absence of meaningful revenue enhancement, the option to pay through traditional consumer finance products represents a cost burden for many merchants. Without concrete partnerships in place, merchants are also unable to access the large consumer base held by consumer finance companies, lowering the value proposition of such products.


Recognising the limitations of incumbent solutions in addressing persistent consumer and merchant pain points, various alternative consumer finance solutions have emerged in recent years – the most notable of them being Buy Now Pay Later (“BNPL”).

The key difference between BNPL and traditional consumer finance products lies in their revenue model – unlike consumer finance companies that derive revenue from charging interest (and associated fees) to consumers, BNPL firms focus on monetising their merchant partnerships by charging a merchant discount rate (“MDR”) for processing new transactions (see Figure 3).

Figure 3: Business Model Differentiators

Source: Quinlan & Associates analysis

The BNPL model was established to provide consumers with faster and easier access to credit while allowing for more flexible repayment terms without charging interest. As such, it was seen as an ideal solution in addressing the consumer pain points associated with traditional consumer lending products. In addition, BNPL firms run extensive marketing campaigns with many of their partner merchants to drive awareness and visibility of merchant products, increasing conversion rates and average order values (“AOVs”). In exchange for these new revenue streams, BNPL firms charge merchants an MDR – a commission for facilitating transactions.


The BNPL landscape

The BNPL model was established to provide consumers with faster and easier access to credit while allowing for more flexible repayment terms without charging interest. As such, it was seen as an ideal solution in addressing the consumer pain points associated with traditional consumer lending products. In addition, BNPL firms run extensive marketing campaigns with many of their partner merchants to drive awareness and visibility of merchant products, increasing conversion rates and average order values (“AOVs”). In exchange for these new revenue streams, BNPL firms charge merchants an MDR – a commission for facilitating transactions.

APAC Landscape

Recognising the explosive growth of the APAC consumer finance market and potential for competitive disruption, a flurry of new BNPL players have set up operations in the region in recent years. It is worth noting from the outset that the dynamics of the credit industry are markedly different across the region, especially when comparing developed and developing APAC markets. For example, only 2% of the Indonesian population currently holds credit cards, compared with 68% of the populace of Japan (see Figure 4).

Figure 4: APAC Credit Card Ownership (2020)

Source: PPRO, Statista, Quinlan & Associates analysis

Such discrepancies reflect the differences in both the proportion of the banked population and the level of financial sophistication across each market, which have been a driving force in shaping the makeup of the BNPL competitive landscape in the region.

User Focus

Due to the heterogenous nature of the APAC market, BNPL providers operating in the region offer very distinct value propositions, largely reflecting the markets in which they operate. Taking target users and merchant dimensions into consideration, BNPL players in APAC can be broadly categorised into three key competitive clusters (see Figure 5), namely: 1. Developed market players; 2. Emerging market specialists; and 3. Supra-regional players.

Figure 5: APAC BNPL Landscape

Source: company disclosures, Quinlan & Associates analysis

1. Developed Market Players

Developed market players operate in countries where the population is highly banked, with larger disposable incomes. They also typically partner with middle- or high-end merchants. These BNPL players position themselves similarly to leading Western BNPL firms, with an extensive user base and wide merchant coverage. Launching the earliest in APAC, Australia’s Afterpay and Japan’s Paidy are prime examples of BNPLs operating in this space.

2. Emerging Market Specialists

Emerging market specialists operate primarily in ASEAN countries, where most of the population is unbanked, with lower disposable incomes. These BNPL players focus on servicing the unbanked population by partnering with low-end merchants (i.e. consumer staples). Akulaku and Kredivo, both from Indonesia, fall into this category.

3. Supra-Regional Players

Lying in the middle are supra-regional players, typically operating in more developed Asian markets, such as Singapore and Malaysia. These firms focus predominantly on low-tomiddle income consumers, targeting merchants offering consumer durables. Examples include Atome and Hoolah, both headquartered in Singapore.

Service Offerings

These three BNPL player groups can be further differentiated across several key dimensions (see Figure 6), namely: 1. Service model; 2. Merchant offering; and 3. Investors / funding source.1

Figure 6: BNPL Player Differentiation

Source: Crunchbase, company disclosures, annual reports, press releases, industry interviews, Quinlan & Associates analysis
1 Note that this refers to capital for business administration, operations, and expansion; BNPL companies separately seek capital (from existing investors and / or alternative funding channels) to fund the extension of consumer credit

Developed Market Players

Backed by a sizeable user base, developed market and supra-regional players charge merchants relatively high MDRs when compared to emerging market specialists. Given their better-established position in the market, many are looking to enhance the experience for their end users by incorporating browsing and purchasing functions into their BNPL applications, as well as integrating with large payment services companies to provide a seamless purchase solution.

Developed market players are typically funded by established financial institutions. For example, Paidy’s investors include Mitsubishi UFJ Financial Group (“MUFG”), Goldman Sachs, and PayPal. Some have also chosen to go public, such as Afterpay (which is listed on the ASX), enabling them to raise capital from public markets.

Emerging Market Specialists

On the other end of the spectrum, emerging market specialists have a more aggressive offering, providing much smaller credit limits to consumers and charging lower MDRs to merchants. In addition, most do not offer pure BNPL services; instead, they usually represent a mix of BNPL and credit providers, monetising both merchants (through MDRs) and users (via interest fees).2 Some players, such as Akulaku, not only impose an interest fee (based on instalment tenure), but also charge handling fees for every transaction. Moreover, as these firms typically operate in less developed markets, integration is not as mature as those operating in developed markets. Due to their riskier nature, supra-regional players and emerging market specialists typically seek alternative funding sources, primarily from private equity and venture capital firms.


2 As these firms offer credit services, they need to hold relevant licence(s) and register with the local authorities; for example, Akulaku and Kredivo have both registered with and are supervised by Otoritas Jasa Keuangan (“OJK”), the Indonesian Financial Services Authority

Industry Outlook

Presenting an attractive alternative channel for consumers to access credit, the APAC BNPL industry is expected to grow rapidly in coming years, particularly as regional economies continue to recover from the Covid-19 pandemic and domestic household consumption power continues to rise (see Figure 7).

Figure 7: APAC BNPL Gross Merchandise Value (USD Billion)

Source: Research and Markets, Quinlan & Associates estimates

With eCommerce sales expected to rise significantly in an increasingly digitalised world, we estimate the total gross merchandise value (“GMV”) of transactions processed by APAC BNPL firms to grow by a CAGR of 39.3% over the next three years, reaching USD 361 billion by 2025.


Industry challenges


Solving for profitability


The opportunities for incumbents




How can we help?


BNPL Consumer Survey (HONG KONG)


CEO & Managing Partner

Background & Work Experience

Benjamin Quinlan is the CEO and Managing Partner of Quinlan & Associates. He is also the Chairman of the FinTech Association of Hong Kong (FTAHK), an Adjunct Professor at the AIT School of Management, a Conference Ambassador for the Hong Kong Tourism Board (HKTB), sits on the Advisory Committee for Hong Kong Science and Technology Park’s (HKSTP) Technology Validation Initiative, is a member of the Asian Financial Forum Steering Committee for the Hong Kong Trade and Development Council (HKTDC), and sits on the Finance, Tax & Legal Steering Committee of the Australian Chamber of Commerce (AustCham) and the Finance & Treasury Committee at the Hong Kong General Chamber of Commerce (HKGCC). In addition, he is a Senior Advisor for a number of leading startups, a Mentor for PingAn’s Cloud Accelerator, a Guest Contributor for eFinancialCareers and Regulation Asia, and has been widely recognised as one Asia’s leading FinTech influencers.

Benjamin has an extensive track record advising many of the world’s leading multinational companies, financial services organisations, SMEs and start-ups on a variety of high-profile strategic engagements. He is quoted extensively in the global financial press and is frequently interviewed by leading media outlets, including Bloomberg, CNBC, Reuters, and Channel New Asia. He is also a regular keynote speaker at leading financial services industry conferences across the world.

Prior to founding Quinlan & Associates, Benjamin was the Head of Strategy for Deutsche Bank AG’s Equities business in Asia Pacific and its Investment Bank in Greater China and sat on a number of the bank’s global and regional executive committees. He was also the global strategy lead for several of Deutsche Bank’s landmark projects executed out of London and New York.

Prior to Deutsche Bank, Benjamin worked as a Management Consultant at Oliver Wyman, a leading international strategy consulting firm. As part of the firm’s Corporate & Institutional Banking practice, Benjamin advised a variety of global and regional financial institutions on a range of strategic matters. He was also actively involved in the firm’s thought leadership publications and was widely regarded as one of Oliver Wyman’s global subject matter experts in investment banking and capital markets strategy.

Before joining Oliver Wyman, Benjamin worked at UBS AG in the bank’s Asia Pacific Client Coverage and Group Strategy departments, reporting into the regional President and CEO. He began his career in M&A and Capital Markets Advisory at PricewaterhouseCoopers (PwC) in Sydney.


Benjamin holds a Bachelor of Commerce / Bachelor of Laws (Honours) and a First-Class Honours Degree in Economics (on scholarship) from Macquarie University, Sydney.

Get in contact with us:

Office Address:

Direct Message: