BNPL services
Over the past few years, the deferred payments service known as BNPL (Buy Now Pay Later) has become more popular among available payment options. Despite fintech companies continuing to lead in providing deferred payments, more traditional banking institutions are now considering incorporating this option into their business strategy.
During the COVID-19 pandemic, the deferred payment option gained significant attention. This coincided with the rapid expansion of the e-commerce market, which created demand for new, more affordable options for financing online purchases. The group of consumers seeking greater purchasing flexibility also grew during this period. Loan management solutions addressed these expectations by spreading payments over 30 or 45 days, with the option for deferral.
How does it function?
The BNPL service is based on a straightforward concept. A customer orders a product from an online store and pays 30 to 45 days later, typically at no additional cost. The store receives immediate payment, and the customer settles the debt within the specified timeframe. It is also possible to make payments in stages.
Traditional banks, seeking a share of this expanding market, are increasingly viewing this service favourably given its ease of use. Insider Intelligence predicted that the value of BNPL financial transactions by 2025 would reach EUR 600 billion.
Benefits of BNPL
One factor relevant to banks evaluating this solution is the broad range of users who have reported using deferred payment services.
The analytical firm The Ascent found that, despite younger customers using the service more frequently - more than 60% of all age groups under 45 - more than 40% of customers aged 55 and older have used the deferred payment service at least once.
BNPL solutions may also be relevant for individuals relocating between geographical regions, serving as an alternative for customers who need to establish credit in a new location.
CreditOnline’s BNPL module
Creditonline developed a specialised BNPL module as part of the CreditOnline Loan Management System, under the “Lending” business line. A financial institution can use this module to add new products and expand its range of financial services without disrupting the existing architecture.
The BNPL module of the CreditOnline Loan Management System performs the following functions:
- managing payment terms within the agreed 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)
- linking with card accounts and cards