Buy Now Pay Later – what’s all the fuss about?

By Yobota

Banking as a Service

Buy Now Pay Later (BNPL) is one of the biggest fintech trends of the year, with ever more retailers looking to offer point of sale (PoS) finance to their customers to ensure they can complete their purchases quickly and easily. Obviously big players like Klarna get a lot of the headlines, but more and more companies are keen to explore their own solutions, and even roll them out under whitelabel so other retailers can benefit with the reassurance that the solution has already been proven. So what’s caused this BNPL boom?

The retail landscape 

Retail and technology have seen a massive shift over the last few years. Digitalisation, supply chain management, and value chain optimisation are all factors that have seen a drive for technological change, with Covid only increasing the momentum. During Covid we’ve seen fashion brands change almost their entire range to loungewear in just a few weeks in response to lockdown. Large retailers turned their stores into fulfilment and distribution centres, and more brands began focusing on making their retail spaces things like digital theatres to provide unique ways to reach customers who are no longer there in person. Vendors are evolving and taking a more unified approach to utilising platforms, so bricks and mortar aren’t dead, but there is a much broader adoption of e-commerce solutions available now to allow you to reach more customers. Lets face it, if they’re done right, innovations in payments can do a lot for the customers’ journey and the retailer’s bottom line. The main thing for the customer is they need to be simple and convenient, and that’s where PoS financing is key.

How does Buy Now Pay later fit in?

The same trends fuelling growth in retail, like digitisation and rising adoption of online services, are being met with increasing repeat usage among younger consumers, and an expanding set of players targeting lending at PoS. Fintechs are capturing much of the value being created in PoS financing because banks have been slow to respond. A common misconception in banking is that shopping apps offering BNPL are pure financing offerings. Whilst arguably true for smaller players, larger players are steadily building scale and engagement with an aspiration to become a “super app,” similar to China-based solutions that offer shopping, payments, financing, and banking products in a single platform. These large providers already monetize consumer engagement through offerings other than financing, offering affiliate marketing, and cross-selling of credit cards and banking products. As long as traditional competitors fail to acknowledge this they’ll continue to find it tough to compete with these players.

What Yobota does 

Most retailers assume a serious investment in an existing app is their only option for BNPL and similar credit services. The expense and complexity of integration can be off putting for businesses, even if it’s a vital part of staying relevant. Current BNPL apps often ignore the needs of the retailer with out of the box features and options baked in, leaving little room for personalisation to meet the specific needs of your customers. With our API connectivity you can have far more control over the services you want to offer, and we can design and deliver exactly the solution you need.

We have vast experience in the lending space and a fully flexible platform that can support whatever innovative financial offering the vendor desires. BNPL is just another element that our modularity and flexibility means we can offer seamlessly to our clients, creating intelligent services and flexible products that directly address the needs of the customer. Our platform enables staff users to self-serve and create BNPL, Revolving Line of Credit (and other!) products and deploy them direct to customers. This can include a specific promotional period or totally free (i.e zero interest and no repayments) offerings, interest bearing but without payments (ballooning debt), interest bearing with payments (resulting in balance going above or below) or pretty much whatever else you can think of. 

Our quant layer allows users to price product economics, fees (if any) and the ability to service accounts, all in one place. From a utilisation perspective we have a flexible API that can be integrated with an existing front end service or used to model a standalone app so you can build exactly the journey you want your customers to experience. We also have strategic partnerships with key players in other services, so we can integrate things like AMLP, KYC and credit checking, to provide greater value and ease of integration for our clients.

How can this help people do more with their money?

A big differentiator for payments services like BNPL will be integrating across the entire purchase journey, leveraging affiliate marketing to subsidise both credit and rewards costs, and delivering greater control and value to the end consumer. These integrations not only contribute to scale and engagement but also help provide much better access to, and visibility of, younger consumers and their credit behaviour. The lines across traditional credit products are already being crossed – for example we can see cards being offered with options to split larger purchases into smaller chunks. Underwriting needs to be agnostic of the product through which credit is being delivered, and we are perfectly positioned to do this while managing economics and risk to enable ever more innovative products to enter the market. As consumers get used to subsidised credit, lenders need to rethink their risk and economic models, and even the underlying value propositions, to ensure they’re designing for their customers’ needs, rather than outdated industry trends. 

Keen to learn more about BNPL? Listen to Yobota’s Paddy Vishani on In Check with Fintech, or book a meeting to understand more.

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