Among a number of industries to have benefitted from the global upset brought on by COVID-19, few have been dealt more of a boost than the buy now, pay later (BNPL) sector. Prevailing economic and financial uncertainty combined with widespread stay-at-home mandates mean that cash-strapped youths the world over are having a field day with the conveniences of online shopping, while using interest-free credit programs to make huge purchases.
Established industry players like ASX-listed Afterpay (APT), which caters primarily to markets in Australia, New Zealand, the United States and the United Kingdom, has seen a 1600 per cent increase in its share price since the middle of March last year, and a still-increasing rate of adoption among millennials means that such a steep growth curve is here to stay.
But for all its popularity in the western world, BNPL is yet to take hold in places like South East Asia — a segment that IOUpay (IOU), a relative newcomer to the BNPL race, is looking to cash in on.
oly, Georgia, serif;font-weight:400;color:rgb(0,15,63);font-size:1.5rem;font-style:normal;text-align:left;background-color:rgb(255,255,255);">A young, tech-savvy market
Of the roughly 670 million people that inhabit the region, around half are under the age of 30. South East Asia is also one of the fastest-growing internet economies, adding an additional 40 million internet users across Indonesia, Malaysia, Vietnam, Singapore and the Philippines in 2020 alone and taking its total user base to an estimated 469 million — roughly 70 per cent of the total population.
This young, highly internet-literate population means that the uptake of new technologies in the region is one of the quickest in the world — prime real estate for rapid BNPL expansion.
In making strides to capture the potentially lucrative audience, IOUpay has signed a Merchant Referral Agreement with EasyStore — a Malaysia-based eCommerce platform — to allow its merchants and customers to use IOUpay’s BNPL payment services.
Last year, EasyStore’s 7000 merchants across Malaysia, Singapore, Indonesia, the Philippines and Thailand processed more than 20 million transactions valued at around $435 million.
These figures reflect the growing prevalence of online spending, which is estimated to hit almost $223 billion by 2025, according to a recent survey by Google, Singapore’s Temasek and consultancy firm Bain & Co.
It’s “a clear indication that momentum has not been derailed by the year’s challenging environment,” the study said.
oly, Georgia, serif;font-weight:400;color:rgb(0,15,63);font-size:1.5rem;font-style:normal;text-align:left;background-color:rgb(255,255,255);">Walking in the footsteps of giants
While IOUpay might be later to the party than the likes of Afterpay, it has the advantage of avoiding much of the teething phase, which has brought a substantial level of criticism for what is so far a largely unregulated market.
Earlier this year, IOUpay secured its Malaysian Money Lending License, meaning it is fully compliant in offering its BNPL service to consumers and merchants in Malaysia. The milestone achievement signalled a shift in the company’s strategy, from one of preparation to execution.
“The completion of this critical milestone ahead of schedule enables the company to now accelerate its plans to capitalise on the significant market opportunities in the BNPL and digital payments sectors…” said IOUpay’s Chairman Lee Chin Wee in January.
COVID-19 aside, he continued, “the market conditions and demand for our product offerings remain strong which is consistent with the continued increased uptake in online purchases and payments across the South East Asia region last year.”
With a $10.5 million financing completed in November, as well as a number of agreements in place with leading credit and financial information reporting agencies, IOUpay is looking towards the soft launch of its BNPL service in February and March this year, with expansion into additional South East Asian markets to continue from there.
To provide some context, Afterpay launched in the U.S. — a similarly young and tech-focused market — in mid-May 2018, when its share price was hovering around the $7 mark. Fast-forward to today, and its shares have soared to more than $155 each.
It’s impossible to tell whether IOUpay will be subject to the same astronomical success, but take into account key demographical factors and there’s a certain sense of déjà vu.
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