Over the past few years, the deferred payments service known as BNPL (Buy Now Pay Later) has become more and more popular among the available payment options. Additionally, despite the fact that fintech projects continue to lead the way in providing deferred payments, more traditional banking institutions are considering incorporating this option into their business strategy.
During the COVID-19 pandemic, the deferred payment option gained a lot of attention. This led to the rapid expansion of the e-commerce market, which in turn led to the need for new, more affordable options for financing online purchases. In addition, the group of consumers who lacked financial security and simply required greater purchasing flexibility saw a significant rise as a result of COVID-19. These expectations were perfectly met by Loan management banking solutions, which spreads out payments over 30 or 45 days and even allows for deferral.
How does it function?
The BNPL service is based on a simple concept. With BNPL, a customer can order a product from an online store and pay for it 30 or even 45 days later, typically at no additional cost. Typically, a customer places an order for a product through an online store, the store receives immediate payment, and the customer settles the debt within 30 to 45 days. It is also possible to make payments in stages. Traditional banks, which are attempting to gain a fair share of this rapidly expanding market, are increasingly viewing this service favourably due to the solution's ease of use and the possibility of its dynamic development. Insider Intelligence predicts that "the value of the volume of financial transactions within BNPL by 2025 will grow to an astronomical amount of EUR 600 billion, so there is a lot to compete for.
Benefits of BNPL
One factor that may be crucial for banks when deciding whether or not to implement this solution is the wide range of users who have admitted to using the deferred payment service.
The analytical firm The Ascent found that, despite the fact that younger customers use the service more frequently (more than 60% of all age groups under 45 do so), more than 40% of customers 55 and older have used the deferred payment service at least once.
The numerous advantages for individuals moving between different geographical regions may also be a decisive factor. BNPL solutions may be an alternative to those that require the consumer to establish credit in their new location for these customers.
Who should you choose?
CREDITONLINE has developed a specialized BNPL module in response to the needs of financial institutions seeking a tool to manage the purchase limit. This module is part of our flagship solution, the CreditOnline Loan Management System, and falls under the “Lending” business line. A financial institution can use our tool to add new products and expand its offering of financial services without disrupting the current architecture.
The BNPL module of the CreditOnline Loan Management System system performs the following fundamental functions:
- managing payment terms within the agreed-upon debt limit;
- instalment purchases;
- spreading a group of purchases into instalments;
- managing debt limits in the revolving loan model with control over payment dates;
- creating payment schedules and managing deferred payment dates;
- managing commissions and interest;
- supporting repayment calendars (annuity, real calendar);
- managing repayments (directly or through dedicated accounts);
- the possibility of linking with card accounts and cards;