As the impact of the global pandemic continues to diminish, consumers are again returning to their pre-pandemic shopping habits. Online sales have been impacted and there are several factors responsible for the drop. Inflation has surged and interest rates have grown significantly. This has led some consumers to forgo buying big-ticket items such as electronics, which are often purchased online. For others, the need to get out and socialize is driving the growth of in-store transactions.
As consumers turn to in-store shopping, BNPL giants are also pivoting their strategy to drive growth amid rising competition and macroeconomic threats. Several players, including Klarna and Zip, have been seen targeting in-store transactions to accelerate their transaction volume and value. For instance,
The Zip card will allow consumers to use the Pay-in-4 feature offered by the firm at all retailers wherever Visa is accepted. Under its pilot program, the firm revealed that more than 90% of the consumers stated that a BNPL card makes the in-store transaction easier. Notably, a waitlist of 250,000 users shows the demand for physical BNPL cards.
Other global leaders in the BNPL segment, such as Klarna and Afterpay, have also increased their focus on in-store transactions. These firms are looking to make major in-roads in the offline retail segment through strategic collaborations and tie-ups with leading brands. For instance,
The in-store transactions are expected to rise significantly over the next few years. Consequently, BNPL firms globally, including in the Middle East and North Africa region, are also targeting in-store transactions. For instance,
This move to attain a big share of the in-store transactions comes at a time when online BNPL space is saturating. Notably, many online merchants are offering BNPL payment options from various providers. With little to no differentiating factor, BNPL players are finding it difficult to capture consumer spending online.
The competition in the online segment has intensified and macroeconomic issues have dampened the growth prospect for BNPL firms around the world. Rising interest rates and fears of recession have forced BNPL firms to re-evaluate their growth strategies. Furthermore, regulation is taking shape in the background. Several governments, including Australia, the United Kingdom, and the United States, have drafted BNPL regulations, which include strong credit checks and tightening oversight over the operations of these players.
This is expected to further slowdown the growth of BNPL providers. Consequently, the move to capture in-store transactions can fuel the growth of players like Klarna, Zip, and Afterpay amid the tighter market conditions over the next three to four years. Furthermore, consumer in-store spending is projected to grow significantly in Q4 2022. Consequently, non-e-commerce retail sale is where these players are targeting to drive the next growth phase of the global BNPL market.
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