‘Buy now, pay later’ spending is set to hit nearly a trillion dollars by 2026 despite increasingly strict regulation of the sector.
According to new data from Juniper Research, spending with BNPL services like Klarna and Laybuy will account for over 24 per cent of all global ecommerce transactions for physical goods by 2026, worth a whopping $995 billion.
This will represent a 274 per cent increase from this year, when BNPL services are expected to account for nine per cent of all ecommerce spending, worth $266 billion.
Juniper believes this growth with be driven by increasing pressure placed on shoppers’ finances due to the pandemic, seeing active users jump from 340 million to 1.5 billion in the next five years.
“As a tool to split the cost for users, buy now pay later is ideally suited for high-cost items, as it enables users to seamlessly split large costs into smaller, more manageable payments,” research co-author Damla Sat said.
“By 2026, these platforms will increasingly become the norm for lower-cost purchases as well; driven by user demand and eCommerce platform integrations.”
It comes amid increasing regulatory scrutiny of the sector following a number of reports suggesting such services can harm users credit scores, and that many can have a disproportionate negative affect on young shoppers.
This incoming regulation will inevitably place restrictions on services, such as limiting charges and enforcing affordability checks, but Juniper believes these will not diminish their appeal but rather place them on more secure footing.
Swedish BNPL giant Klarna last week saw its valuation rise 50 per cent to $45.6 billion after a recent round of funding led by Japanese company SoftBank, making it Europe’s most valuable fintech company.
Klarna watched its valuation rise to $31 billion in March after being previously valued at $11 billion in September 2020.