How can marketers cope with the slowing down of 'Buy Now Pay Later' usage in HK?

With technological advancements, a variety of digital payment tools have emerged, and “Buy Now; Pay Later” (BNPL) is one of the emerging financial products. BNPL is popular among young people overseas, it has also emerged in Hong Kong recently. According to a study by OMD Hong Kong, BNPL enjoys a very high awareness (95%), however only 30% of the respondents have used it before.

Unfamiliarity of the differences between BNPL and credit card instalment could possibly be one of the reasons hesitating them from using. The study also found that users of BNPL are more skewed towards younger female with higher personal income, with 64% of them being female users, 30% of which aged 30 to 39. The average monthly personal income of BNPL users is HK$33.2K.

Furthermore, BNPL usage consideration among awarers is on the low side, with an average of 35%. Even among respondents who used BNPL before, only 67% of them express very likely to use it again. Among awarers, although female (38%) and age group of 40 to 49 (46%) are more likely to use BNPL, more communication on the uniqueness of BNPL is necessary in order to boost consideration, according to the report. For respondents who knew but never tried the tool, likeness to consider is even lower (20%) and they may need a bit more push factors for considering it. 

Commenting on the slowdown of usage of BNPL, Sam Leung, global head of payment business, Payment Asia told MARKETING-INTERACTIVE that Buy Now Pay Later has bigger potential in countries that have low credit card penetration and limited access to formal credit. Hence, across APAC, BNPL is still welcome in countries such as Malaysia. For example, Shangri-La Hotels and Resorts tied up with fintech solutions company Pace Enterprise last April to introduce a "Buy Now Pay Later" option at participating hotels in Malaysia. Hotel guests can split their payments over three months, interest-free. The new payment option encompasses services available within the establishment, including hotel stays, dining, as well as wellness services, such as massages or spas.

Similarly, Malaysian Aviation Group (MAG) has tied up with Buy Now Pay Later platform, hoolah, to provide a seamless and convenient payment option for travellers. Through this collaboration, travellers in Malaysia and Singapore are able to book their getaway online with Malaysia Airlines and pay via a flexible three-month, interest-free payment option. 

Yet in Hong Kong, the situation is slightly different as the city’s financial services and banking system is relatively strong in the region, according to Leung. “In Hong Kong’s online and offline retail sector, BNPL made up just 2% of payments by value at physical stores in Hong Kong, compared with 24% for virtual wallets, according to a report of Fidelity National Information Services (FIS).

On the other hand, a spokesperson from Visa saw a continued growth in instalment usage around the world as BNPL payment tool encourages the trend of instalments, “The growth is partially driven by millennials and Gen Z as a new class of consumers who seek experience, convenience, flexibility and choice,” said the spokesperson.

With the expansion of choices and convenience for buyers and sellers, Visa’s spokesperson said the company has been embracing instalments with the launch of a technology solution called Visa Instalments with HSBC, which allow consumers the option to pay for purchases over time by dividing the purchase amount into smaller equal payments. Supported by Visa Instalments, HSBC Visa cardholders can now enjoy more payment experiences and repayment options at checkout by easily splitting purchases the way they prefer. In addition, merchants can use the solution to offer their customers greater flexibility to pay for their purchases at the flick of a switch.

Does it create new opportunities in the marketing industry in Hong Kong? 

In fact, whether the emergence of the BNPL tool could benefit marketers in Hong Kong, is another million-dollar question.

An instalment ecosystem built on the foundation of trust and responsibility will benefit everyone everywhere. Beyond the consumer appeal, offering instalments can increase average ticket size and average conversion rate for merchants, said Visa’s spokesperson.

“For banks or fintech solution providers, offering more flexibility to customers encourages loyalty. There’re many ways marketers can do to enable consumers that are new to instalments to enjoy the most from this new buying journey,” said the spokesperson.

Having a slightly different view on this was Payment Asia’s Leung, who saw slowing down of usage of BNPL since late 2022, “The slowing down on BNPL means consumers are more careful these days, with fewer impulse purchases and more careful future plans”, Leung said.

He added that one of the greatest fear consumers expressed over BNPL was the possibility of overspending, more than half of them stating it as a concern. High fees associated with missed payments and debt risk were also common worries. “For marketers I think they may need to impress customers with rational consumption methods,” he added.

In fact, there are still some potential risks of using BNPL, such as customers may end up facing large amounts of debt if they forget to pay the bill in time or not use them properly, "It may also posts risk on BNPL companies to have higher outstanding payment and affected its cashflow. These issues can affect the stock prices of some of the large Asian BNPL providers," Leung said.

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