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Hear from Paul Chandler on BNPL’s revolutionary impact on payments and its financial landscape transformation.

Buy now, pay later (BNPL) has the potential to revolutionise the payments industry with its exponential growth. It is more than simply a fad.

Paul Chandler, sales director at Compass Plus Technologies, a payments technology expert in Europe, examines the profound effects of bad debt load (BNPL) and how it’s changing the financial environment. He provides insights that are essential to comprehending how BNPL is changing the industry.

The Financial Times, Forbes, and other publications are all weighing in on the viability and long-term role of branch network payments (BNPL), which is the buzzword of the day. statements made in a recent Harvard report stating that BNPL is currently “a table-stakes payment option and growth lever.” There is no denying that BNPL is here to stay, from the more circumspect This Is Money, who refers to it as the “new wild west of the borrowing industry,” to “it is the new way to pay.”

According to Juniper Research, the number of individuals using BNPL globally will increase to over 900 million by 2027, from 360 million in 2022. The primary driver of this development and popularity is consumer demand.

In addition to being popular with millennials and Generation Z, BNPL is also becoming more and more popular with older generations who are feeling the squeeze of living on a limited income due to the crisis in the cost of living.

BNPL

Changing scene

Non-financial companies have up to now dominated this market, but traditional banks and payment networks are becoming the latest players to join the BNPL bandwagon. It becomes a really intriguing period for the payments landscape and the evolution of BNPL products on offer—whether card-linked, at-purchase off-card, post-purchase off-card, or even merchant-funded—when you throw digital giants like Apple into this enormous melting pot.

In the beginning, gaining market dominance required a strong emphasis on increasing new sales for retailers. As a result, BNPL providers benefited from speedy merchant acquisition, speedier consumer onboarding, softer credit checks, and more technological agility.

Ongoing discussions about these players’ sincerity in terms of innovation versus consumer protection, however, have swiftly emerged. Whose interests are being served by BPNL suppliers, the consumer or the merchant? Is this only another opportunity for customers to get into debt, or is this a creative technique to increase payment accessibility for all people, even the underprivileged? Does responsible financing conflict with the simplicity of purchasing?

These are not new worries, though; comparable discussions have been triggered by credit cards and even contactless payments. Actually, trust and loyalty are the problems that BNPL suppliers have to deal with. Whatever one’s opinion, there is no denying that BNPL providers are fundamentally changing the nature of lending in the payments sector, and everyone is paying attention.

Banks’ influence

Go into banks. Because they have more advanced scoring systems, a greater amount of previous data on the behaviours and patterns of their customers, and the ability to make more financially responsible judgements, banks are in a better position to handle BNPL in a more responsible manner. Because of these established, long-standing ties, banks also enjoy trust.

According to a recent Financial Brand survey, 78% of consumers said they would prefer BNPL financing solutions from banks with whom they already have an account since these institutions are better equipped to handle and comprehend their more complicated product needs.

But with their more recent, nimble technology stacks, fintechs are more agile and flexible than many banks. Rather, they move more slowly and approach with caution. Because of its broad appeal, financial institutions (FIs) should examine their customer segments more closely to determine how BNPL can be used to improve their lending product suites and engage and retain customers. They should also think about collaborating with a reputable solution provider to shorten their time-to-market.

Customers are already selecting their allegiances due to aggressive marketing and competitive posturing from all new competitors. In order to stay competitive, card networks like Visa and Mastercard are aggressively releasing new services, and Apple is pushing forward with their offering. As a result, it is more important than ever for players to include BNPL in their payment toolkit. The Consumer Financial Protection Bureau recently released a report stating that “the financial and operational benefits over legacy credit products are real and sizeable” and that now is the right time to take action.

Continue the race

The competition for BNPL market share is intense, and those who do not actively participate risk falling behind as demand in embedded finance soars and innovative challenger banks acquire widespread traction.

The winners will concentrate on developing a reputation for themselves as a reputable and trustworthy provider of BNPLCs by fostering responsible consumer lending and utilising an agile technology-based approach to adapt and future-proof their business.

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