PIXABAY

THE BUY NOW, PAY LATER (BNPL) market is expected to contribute 6.7% in gross merchandise value (GMV) to the Philippine digital economy this year, financing firm UnaCash said on Tuesday.

“Our latest findings suggest that the Philippines’ BNPL market is experiencing moderate yet stable progress — affirming its growing role in spurring economic growth. We are witnessing a notable shift in consumer behavior where there is a consistent rise in patronage for this mode of financing,” UnaCash Product Head Erwin G. Ocampo said in a statement.

“Amid economic pressures, we also believe that the increasing adoption of BNPL services is reflective of Filipinos’ view of it as a convenient way of managing their spending habits,” he added. “While consumers are still wary of rising commodity prices in 2024 and less optimistic about their finances this year, financing options like BNPL remain great tools for making big-ticket purchases.”

UnaCash’s forecast for BNPL’s GMV contribution for this year is higher than the actual 4.88% in 2023 and 4.19% in 2022, it said. GMV reflects the total value of goods or services sold over a certain period of time through a customer-to-customer exchange site.

“The forecast was made after a comparison of the volume of the country’s BNPL market from 2020 to 2023 to the growth rate of the Philippine digital economy during the same period,” it said.

The Philippine digital economy amounted to P2.05 trillion in 2023, growing by 7.7% from the year-ago level and contributing 8.4% to gross domestic product, government data showed.

However, the annual growth in the digital economy’s gross value added last year slowed from the 9.4% pace in 2022 and 10.7% in 2021.

UnaCash said BNPL’s “positive impact” on the digital economy is primarily seen through the growing use of these services across several transaction channels.

Micro, small, and medium enterprises have benefited from BNPL services as these have become a preferred payment method for both online and offline retailers, “enhancing their competitiveness and contributing to the overall digital economic landscape,” it said.

BNPL also “fosters trust in digital payment methods, where Filipinos perceive this as a “time-tested” financing service and budget management tool,” UnaCash said. “This leads to the further growth in digital payments, which eventually fuels the digital economy.”

“BNPL acts as a crucial tool for e-commerce businesses, increasing average order values and propelling the sector’s growth. The growing landscape for e-commerce is significantly intertwined with the growth of BNPL. Spending in the e-commerce segment is projected to increase nine times by 2026 from 2021,” it added.

Digital payments made up 52.8% of the volume of retail transactions in 2023, latest Bangko Sentral ng Pilipinas (BSP) data showed, up from the 42.1% share in 2022. In terms of value, 55.3% of retail transactions last year were done online, also rising from 40.1% the year prior.

The BSP wanted at least 50% of the volume and value of retail transactions done online by end-2023 under its Digital Payments Transformation Roadmap.

The increase in digital payments was driven by wider use of online transaction channels among individuals and businesses, the central bank said, with the coronavirus pandemic accelerating this shift.

“The need for contactless transactions and the convenience of online payments have led to a surge in their usage but also fostered innovation in the digital payment sector,” the BSP added. — AMCS

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