The Rise of Buy Now Pay Later (BNPL) in Pakistan

Buy Now, Pay Later (BNPL) is a financial model that allows consumers to make purchases immediately and defer payments over a specified period, often without incurring interest. Initially pioneered by global players such as Afterpay, Klarna, and Affirm, BNPL has gained immense traction worldwide as a flexible alternative to traditional credit. Its appeal lies in accessibility, particularly for individuals who lack access to conventional banking services.

As e-commerce continues to flourish globally, BNPL has become a game-changer in consumer financing. Countries with developed financial markets have seen BNPL adoption surge, with major retailers integrating it as a preferred payment option. The model’s success has prompted its expansion into emerging markets like Pakistan, where digital financial services are rapidly evolving.

Why the Need for BNPL Arose

The rise of BNPL services in Pakistan can be attributed to several socio-economic factors that have increased demand for flexible payment solutions:

1. Rising Inflation and Economic Uncertainty: Pakistan has faced economic challenges, including high inflation rates and currency depreciation, making it difficult for consumers to afford essential goods and discretionary purchases in one go. BNPL offers a way to manage expenses without resorting to high-interest loans or credit cards.
2. Limited Access to Traditional Credit: A significant portion of the population remains unbanked or underbanked, with limited access to credit cards and conventional financing. BNPL bridges this gap by providing a more accessible alternative to those without a formal credit history.
3. Expanding E-Commerce Market: With the rapid growth of online shopping, there is an increasing need for digital payment solutions that enhance affordability and convenience. BNPL enables customers to shop online without upfront payments, encouraging higher conversion rates for retailers.
4. Young and Digitally Savvy Population: Pakistan has a large youth population that is highly engaged in digital transactions. BNPL aligns with their spending habits, providing a modern and user-friendly credit option.
5. Shariah-Compliant Financing Demand: Given Pakistan’s predominantly Muslim population, there is a growing demand for financing models that comply with Islamic banking principles. BNPL providers offering Shariah-compliant solutions, such as those based on Musawamah, cater to this preference while expanding financial inclusion.

BNPL’s Emergence in Pakistan

Pakistan’s adoption of BNPL reflects a broader shift towards digital financial solutions. With a population exceeding 220 million and a growing number of internet users, the country presents a fertile ground for BNPL services. The rise of e-commerce platforms has further fueled this trend, as consumers seek convenient and flexible payment options.

Key Players Driving BNPL in Pakistan

Several fintech companies have been instrumental in introducing BNPL to the Pakistani market:

• QisstPay: In December 2021, QisstPay became the first company to receive a BNPL license from the Securities and Exchange Commission of Pakistan (SECP). This milestone allowed QisstPay to expand into various lending verticals, including house and car financing.
• QistBazaar: This platform has made significant strides by securing a PKR 500 million equity investment and forming an embedded finance partnership with Bank Alfalah in May 2023. This collaboration marked the first time a commercial bank took an equity stake in a BNPL fintech in Pakistan.
• JazzCash: As one of Pakistan’s leading fintech platforms, JazzCash launched its BNPL service in early 2025. Initially partnering with retailers like Telemart and EGO, the service allows customers to split payments into three installments over 60 days, with plans to onboard more brands.

Regulatory Landscape and Shariah Compliance

The SECP has played a pivotal role in regulating and facilitating the growth of BNPL services:

• Shariah Compliance: In September 2023, the SECP issued a Shariah compliance certificate to QistBazaar, endorsing its BNPL services based on the Musawamah principle. This certification underscores the importance of aligning financial products with Islamic finance principles in Pakistan.
• Consumer Protection Measures: To curb predatory lending practices, the SECP introduced measures in August 2023, including capping individual loans at PKR 25,000 per app and an aggregate limit of PKR 75,000 across multiple apps. These steps aim to promote responsible lending and protect consumers from debt traps.
• Lack of Centralized Regulations: While the SECP oversees BNPL licensing, there is no dedicated regulatory body governing BNPL operations, leaving room for gaps in consumer protection. Currently, many BNPL firms operate in a gray area without clear oversight from the State Bank of Pakistan (SBP) or the SECP. This fragmented regulatory framework could hinder long-term stability and consumer trust in BNPL services.

Impact on Consumer Behavior and E-Commerce

BNPL services are reshaping how Pakistani consumers approach shopping:

• Increased Purchasing Power: By allowing deferred payments, BNPL enables consumers to afford higher-value items, boosting sales for retailers. For instance, BNPL adoption has led to a 30% increase in average order value on major Pakistani e-commerce platforms.
• Financial Inclusion: BNPL platforms often cater to unbanked individuals, providing access to credit facilities previously unavailable to them. According to a report by the Pakistan Fintech Network, nearly 40% of BNPL users in the country do not own a traditional credit card, demonstrating its role in broadening financial access.
• Shift in Payment Preferences: The convenience of BNPL is leading to a gradual shift away from traditional cash-on-delivery methods towards digital payments. Data from Daraz, a leading e-commerce platform in Pakistan, shows that BNPL transactions have grown by 65% over the past year, reflecting changing consumer payment habits.

Challenges Facing BNPL Adoption in Pakistan

While Buy Now, Pay Later (BNPL) services are gaining momentum in Pakistan, several challenges hinder their widespread adoption:

1. Consumer Awareness and Financial Literacy A significant portion of Pakistan’s population lacks familiarity with BNPL services. This limited awareness, coupled with low financial literacy rates, impedes consumers’ ability to make informed decisions about utilizing BNPL options. According to S&P Global, only 26% of Pakistani adults are considered financially literate, which is substantially lower than neighboring countries like Sri Lanka, where the rate is 35%. This gap underscores the need for comprehensive educational initiatives to enhance understanding of digital financial services.
2. Regulatory Challenges and Oversight The regulatory framework for BNPL services in Pakistan is still evolving. The State Bank of Pakistan (SBP) oversees banks, while the Securities and Exchange Commission of Pakistan (SECP) regulates non-banking finance companies (NBFCs). However, many BNPL providers operate without the necessary NBFC licenses, complicating regulatory oversight. This lack of clear jurisdiction and enforcement mechanisms can lead to consumer protection issues and market instability.
3. Data Security and Privacy Concerns The surge in digital financial services has heightened concerns about data security and privacy. Fintech companies, including BNPL providers, face challenges in safeguarding sensitive consumer information against cyber threats. The absence of comprehensive data protection legislation in Pakistan exacerbates these concerns, making consumers wary of adopting digital payment solutions.
4. Rising Defaults and Credit Risk BNPL operates on short-term lending models, making it vulnerable to high default rates, especially in an economy with fluctuating income levels. Without stringent credit scoring mechanisms, there is a risk of over-indebtedness, leading to financial instability for both consumers and service providers.

Outlook for BNPL in Pakistan

The BNPL sector in Pakistan is poised for significant growth, driven by increasing digital adoption and evolving financial regulations. As awareness and trust in BNPL services grow, more retailers and fintech companies are expected to enter the market. Additionally, integrating artificial intelligence and machine learning for risk assessment can enhance credit scoring and mitigate default risks. Collaborations between BNPL providers and traditional banks may also lead to more structured regulatory frameworks, fostering sustainable growth. Ultimately, the success of BNPL in Pakistan will depend on regulatory clarity, consumer education, and responsible lending practices.