With relatively low financial inclusion and even lower credit card penetration, BNPL offers the Indonesian public an alternative to pay a lower upfront amount for instant gratifications at lower or sometimes zero interest.
This trend of digital lending is due to large numbers of underbanked consumers lacking access to credit and payment platforms, resulting in consumers turning to alternatives such as BNPL to fund their purchases.
The payment adoption of BNPL is expected to chart a compound annual growth rate (CAGR) of 32.5 percent during 2022 to 2028, a slight drop from the 44.4 percent estimated.
BNPL usage to increase along with the rising internet penetration rate in Indonesia, which is 68 percent in 2021 and the highest across the Southeast Asian region and is expected to reach 79 percent by 2025.
UOB Bank’s report found that Indonesians are more inclined to try BNPL because of sign-up promotions and promotion referrals (51 percent), competitive interest rates compared to credit cards (51 percent), and no credit cards (28 percent). The quick approval of applications (less than an hour) and the zero-interest loans also contributed to the popularity of BNPL amongst Indonesian consumers.
The increasingly competitive B2C BNPL market, firms are shifting their focus to the B2B sectors to gain more shares in Indonesia’s BNPL market.
BNPL firms are also exploring partnerships with merchants to allow their customers to shop from merchant partners to increase the usage of their services.
The lack of financial literacy among Indonesians, especially those living in rural areas, may put many in vulnerable positions. Particularly when it comes to unsecured loans with high-interest rates.