Assessing the potential of buy now, pay later services

The adoption of buy now, pay later (BNPL) services has started to pick up in Vietnam. How do you see the potential of such services here?

BNPL has entered into a new stage of development in Vietnam. Indeed, BNPL has been prevalent in many developed countries such as Europe and the United States. In Asia-Pacific, this payment method is becoming more popular in Australia and Singapore. The BNPL market is predicted to post a compound annual growth rate of more than 40 per cent over the next three years. As BNPL providers have made efforts to improve their service and technology, this payment method is expected to enjoy better developments.

Vietnam is a country with a lot of potential for BNPL development. The growth of an extensive e-commerce system and the decline in the proportion of cash payments serve as the foundation for this potential outlook. Numerous offline and online retailers have also jumped on the bandwagon. These are favourable conditions to develop and create big data to promote BNPL. I have a strong belief that BNPL will thrive in Vietnam in the years to come.

Michal Skalicky, chief customer officer of Home Credit Vietnam

As BNPL is in the fledging state of development in Vietnam, what are the challenges for promoting related methods?

The Vietnam e-commerce ecosystem has some structural bottlenecks, which may hinder the rate of BNPL payment adoption. The challenges include the low penetration of credit cards and the popularity of cash on delivery as a payment method, which is expected to account for 80 per cent of all transactions in 2021.

There are other issues in developing this product as well. Given that BNPL is a novel payment method, it is essential to invest in technology infrastructures like information, data, and digitalisation to provide users with a high level of convenience. Among them, scale plays an important role in the development of the BNPL model.

Specifically, BNPL will become more effective as more customers use this payment option. We are also facing the difficulty of finding new talent in startups to promote the digitalisation of cashless payment systems like BNPL.

Home Credit has invested around $8.7 million into Home PayLater to penetrate deeper into Vietnam’s BNPL market. What is the strategy to expand the product line in this area?

We have rolled out our BNPL product Home PayLater into the market. As the service provider, we are searching for collaborators to implement the BNPL model. We also act as a partner for our customers. Due to the lack of product standards, customers should choose service providers based on specific criteria.

In particular, they should have transparency about their products. Naturally, the more banks that the BNPL providers work with, the more likely it is that they will supply a high-quality product.

It is said that online shoppers opt for the BNPL method to purchase high-value products. However, we see that low-value products experience significant growth in BNPL adoption. We have a plan to expand our BNPL service in the offline market. It is obvious that we can increase our offline presence if we have more knowledge and expertise with user consumption patterns.

This online-to-offline trend is an evolution for the market. In fact, BNPL is an effective tool to do business in line with future market developments.

Home Credit has signed a strategic cooperation agreement with Tiki to promote Home PayLater. What is the company’s plan to expand partnerships with other players?

BNPL is one of the payment methods in that we are promoting strategic cooperation. We believe that choosing partners is key to promoting our expansion and monitoring the management of the system. These partnerships are vital for us to build a foundation and expand the customer base.

We are very proud that Home PayLater complies with the company’s credit rating guidelines. We have chosen Tiki as our first partner to launch this BNPL product. We also help increase customer trust for the platform so customers can make online shopping quickly.

Besides Tiki, we are also looking for other partners to further expand our partnerships. To facilitate the goal, we have made a heavy investment in infrastructure and data to ensure customer identification via face ID, while ensuring compliance with legal regulations on data privacy.