Ultimate Guide to Building a Buy Now Pay Later Application: Market, Tech Stack & Cost

In the dynamic landscape of e-commerce, innovative financial solutions are continually reshaping the way consumers shop. One such groundbreaking concept that has taken the market by storm is the Buy Now Pay Later (BNPL) model. This financial solution offers consumers the flexibility to purchase their desired products instantly and pay for them over a specified period. This model has not only enhanced the overall shopping experience for consumers but also opened up new avenues of growth for businesses.

According to a report by Grand View Research, the global BNPL platform market size was valued at USD 7.3 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 21.2% from 2020 to 2027. This exponential growth is driven by the increasing penetration of online shopping, coupled with the consumer demand for easy and flexible payment options. The BNPL business model is proving to be a win-win for both consumers, who get the flexibility of payments, and merchants, who see increased sales and customer loyalty.

This blog aims to guide you through the process of building a leading BNPL application. We will delve into the intricacies of the BNPL business model, discuss the technology stack required for building a robust application, and explore the development cost and potential profitability. Whether you're a budding entrepreneur or an established business looking to tap into this booming market, this comprehensive guide will equip you with the knowledge and insights you need to succeed in the BNPL space.

Why Should You Invest in BNPL App Development?

The BNPL market is booming, and it's not showing any signs of slowing down. If you're considering investing in BNPL app development, here are three compelling reasons why you should:

1. Growing Consumer Demand for Flexible Payment Options

In today's fast-paced world, consumers are constantly looking for ways to make their shopping experience more convenient and hassle-free. The BNPL model caters to this demand by offering consumers the flexibility to purchase products instantly and pay for them over a specified period. This not only enhances the overall shopping experience but also encourages consumers to make more purchases, thereby driving sales for businesses.

2. Untapped Opportunities in the B2B Sector

While the B2C sector has been quick to adopt the BNPL model, the B2B sector presents untapped opportunities. Many businesses struggle with cash flow management and often require short-term loans to keep their operations running smoothly. A BNPL application that caters to the B2B sector can tap into this need and open up a new revenue stream. According to a report by Mercator Advisory Group, the B2B BNPL market is estimated to be worth $700 billion.

3. High Potential for Profitability

BNPL applications can generate revenue through various channels, making them a profitable venture. They can earn a commission on sales made through affiliate marketing, charge late fees or interest on unpaid installments, or earn transaction fees from merchants. Additionally, they can offer premium features or subscription-based services to customers for an additional fee. With the right business model and strategy, a BNPL application can be a lucrative investment.

For eg. Klarna and Afterpay, two of the leading players in the BNPL market, have demonstrated impressive revenue generation strategies. Klarna, for instance, generates revenue primarily through merchant fees, charging retailers for each transaction made through its platform. On the other hand, Afterpay follows a similar model but also collects late fees from customers who fail to make their payments on time. In the fiscal year 2020, Afterpay reported an income of AUD $519.2 million, with merchant fees accounting for 80% of its total income and late fees contributing to the remaining 20%. These models highlight the profitability potential of BNPL applications.

Technology Stack for BNPL Application Development

Building a robust and scalable BNPL application requires a solid technology stack. Here's a breakdown of the technologies that can be used for different aspects of BNPL application development:

Front-End Development

The front-end of the application is what users interact with. It needs to be intuitive, responsive, and visually appealing. Here are some technologies that can be used:

React Native: A popular framework for building cross-platform applications. It allows developers to write one codebase that works on both Android and iOS.

Flutter: Another excellent choice for cross-platform development. It's known for its easy learning curve and high performance.

Back-End Development

The back-end of the application handles business logic, database interactions, and server configuration. Here are some technologies that can be used:

Node.js: An open-source, cross-platform, JavaScript runtime environment that executes JavaScript code outside a web browser. It's known for its scalability and speed.

Express.js: A minimal and flexible Node.js web application framework that provides a robust set of features for web and mobile applications.

Database

A database is used to store, retrieve, and manage data in a structured way. Here are some technologies that can be used:

MongoDB: A source-available cross-platform document-oriented database program. It's known for its flexibility and scalability.

PostgreSQL: A powerful, open-source object-relational database system with over 30 years of active development that has earned it a strong reputation for reliability, feature robustness, and performance.

Cloud Infrastructure

Cloud infrastructure is used for hosting the application, storing files, and managing databases. Here are some technologies that can be used:

Amazon Web Services (AWS): A comprehensive and broadly adopted cloud platform that offers over 200 fully-featured services from data centers globally.

Google Cloud Platform (GCP): A suite of cloud computing services that runs on the same infrastructure that Google uses internally for its end-user products.

Cost of Developing a BNPL Application

The cost of developing a BNPL application can vary significantly based on several factors. Here's a breakdown of the key elements that influence the cost:

Complexity of the App's Features

The more features and integrations an app requires, the more time and effort it will take to develop, resulting in higher costs. Basic features like user registration, product listing, and payment processing are essential. However, advanced features like AI-based recommendations, in-app chat, and detailed analytics can add to the development cost.

Choice of Platform

The platform you choose to build your app on can significantly impact the cost. Native app development, which involves building separate apps for iOS and Android, can be more expensive than cross-platform development, which allows you to build a single app for both platforms.

Design of the App

A high-end design system requires more attention to detail and takes more time to develop, which can increase the cost. However, a well-designed app can enhance the user experience and increase user engagement.

Scalability of the App

If the app is built to cater to a massive audience, it will require a robust infrastructure that can handle a high volume of traffic. This can result in higher costs.

Development Team's Experience and Location

The experience level of the development team can also affect the cost. A team with a higher level of experience and expertise may charge more. Additionally, the cost of hiring a development team can vary based on their location. For instance, developers in North America typically charge higher rates than those in Asia.

Considering all these factors, the cost of developing a BNPL application can range from $15,000 to $150,000 or more. It's important to note that these are rough estimates, and the actual cost can vary based on your specific requirements and the development team you choose.

Wrapping Up: Seizing the BNPL Opportunity

Investing in a Buy Now Pay Later application presents a promising opportunity in the current e-commerce landscape. With the right approach, technology stack, and the right BNPL app development team, you can create a successful BNPL application that caters to the needs of your target audience and drives your business growth.

While the development process may seem daunting, breaking it down into manageable steps - understanding the market, choosing the right technology stack, estimating the cost, and planning for profitability - can make it much more approachable.

Remember, the key to success in the BNPL market lies in offering a seamless user experience, secure transactions, and flexible payment options. With these elements in place, your BNPL application can stand out in the competitive market, attract a loyal user base, and generate significant revenue.

Whether you're a budding entrepreneur or an established business, the BNPL industry offers a wealth of opportunities. So, take the plunge, and you could be the next success story in the booming BNPL market.