It is no secret that US-based tech company Square has been steadily making inroads into global tech hotspots. Square’s recent $29 billion acquisition of Australian fintech company Afterpay is just one of many expansions for the payments provider, which has clearly set its sights on this side of the globe.
While Square still needs to work out some kinks with its new acquisition, this deal will definitely have an impact on Square’s entry into the Southeast Asian fintech space and the emergence of ‘buy now and pay later’ or BNPL solutions in the region, where many consumers are unbanked or underbanked.
Over the last year, e-commerce has driven the growth of BNPL as a new payment model that gives Southeast Asian buyers greater freedom over their purchases. FIS reports that BNPL is, in fact, the fastest-growing online payment method in Singapore, forecast to grow from 3% to 13% by 2024 on the back of e-commerce growth driven by Gen Z and millennials.
BNPL allows more people in the region the opportunity to easily own anything from mobile phones, TVs, furniture or clothing. BNPL also gives those who live paycheck-to-paycheck, usually young professionals, the chance to afford purchases and spread their payments at little to zero interest and without the credit checks.
This is not without significant benefits for fintech. A mobile wallets report by Boku and Juniper Research Ltd. forecasts the number of mobile wallets in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam to grow to almost 440 million, a staggering 311% increase between 2020-2025.
For Square, acquiring Afterpay is a very logical decision. The Australian fintech, which halved its losses last year, announced plans to expand its ‘buy now pay later’ service to Asia and three other continents. Its first move was to acquire Empatkali, a Singapore-based, Indonesia-focused platform that provides users with instalment-based payment solutions for online and offline transactions.
While there are no leading BNPL providers in Southeast Asia yet, the space continues to grow. Square’s acquisition of Australia-based Afterpay is a strategic move that signals the emergence of BNPL in Asia Pacific. What’s clear is that BNPL should not be seen as an isolated service but as part of a platform offering many financial services for consumers and businesses alike.
This approach would provide more value to both customers and investors by integrating with other industries or platforms such as mobile payments, online lending, and personal finance management tools.