Khan also provided an analysis on the major BNPL market players in each country. While the Southeast Asian BNPL market is new in comparison to that of Europe, there is no one dominant market player in the region. Khan also shared that over the last two years, banks have been the primary acquirers of BNPL companies. As the industry continues to grow, he expects more players and regulating bodies to emerge, along with new acquisitional targets, thus increasing the potential for M&A.
He shared, "BNPL in Southeast Asia has the foundations in place to realize secular growth. Local players will continue emerging to present M&A opportunities, in line with the global trend where, not only do we see an uptake in M&A of BNPL, but different buyer types such as banks, emerging. In the long run, we stand on the view that e-commerce trailblazers aspire to disrupt the established banking order, positioning themselves as the avant-garde of the banking future, and espousing the notion that lending can be democratized through pervasive technology. Ultimately, fintech is poised to dismantle the longstanding entry barriers traditionally safeguarded by banks."
L-R: Mak Khan, Manager at YCP Solidiance, Alex Charles Vila, Manager at YCP Solidiance
Meanwhile, Vila shared YCP Solidiance’s experience getting the valuation of BNPL company Affirm. He first explained the revenue model of the company, which primarily earns through merchant commissions, interest income, and the sale of loans. He then demonstrated how the YCP team crafted the adjusted discounted cash flow (DCF) method and explained why this specific method works for money-lending companies, like BNPLs. With the nature of their business, BNPL companies are highly capital-intensive and will always require more capital to grow. During his demonstration, Vila emphasized the importance of debt for BNPL companies like Affirm.
He shared, "For Affirm, debt is required to ‘manufacture’ their products, the BNPL loans. Hence, for BNPL companies, we can consider that debt is not the source of funds but rather their raw material. In other words, we can say that debt for Affirm is what wood is for a carpenter."
While the BNPL market across Southeast Asia is steadily growing, there is still room for more growth and improvement in the years to come. The BNPL industry will continue to grow with more players emerging presenting more opportunities for M&A, and ultimately, challenging the established banking order.
To learn more about how your company can succeed in SEA’s BNPL industry, contact us at pr@ycp.com. For further insight on the outlook of Southeast Asia’s BNPL industry, subscribe to our newsletter here and read our reports: