Buy Now, Pay Later market to contribute 6.7% in GMV to the digital economy in 2024

UnaCash, an in-app and in-store financing solutions provider, expects the Philippines’ buy now, pay later (BNPL) market to contribute 6.7% in gross merchandise value (GMV) to the digital economy this 2024.

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.^[1]

Gross merchandise value represents the total sales volume, or the value of goods or services sold over a certain period of time, through a customer-to-customer (C2C) exchange site.

BNPL’s forecasted GMV contribution this year is higher compared to what was seen in 2023 (4.88%) and 2022 (4.19%).

UnaCash observes that BNPL’s positive impact in the digital economy is primarily seen through these three channels:

MSMEs – BNPL has become a preferred payment model for both online and offline retailers, enhancing their competitiveness and contributing to the overall digital economic landscape, especially in a country dominated by micro, small, and medium-sized enterprises (MSMEs).

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

E-commerce – 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.

“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. “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.”

Earlier research from the Bangko Sentral ng Pilipinas in April of this year revealed that consumer sentiment improved in the 1st quarter of 2024. Consumers are also less hesitant about buying big-ticket items in Q1 2024 and the next 12 months.

“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,” Ocampo added.

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^[1] UnaCash utilized a linear regression model to estimate the total and more accurate assessment of BNPL’s impact on the digital economy. Based on data from reports for 2020, 2021, 2022 and 2023, and data source for 2020-2022 via psa.gov.ph. The value for 2023 was calculated as the growth rate of the available data from the report (2023 to 2022) with further multiplication of the resulting coefficient by the available value of the volume of the digital economy for 2022 from the previous data source.