How technology will play a crucial role in the success of BNPL providers?

Buying something today and paying it off later is not a new concept anymore. Today, the market is flooded with Buy Now, Pay Later (BNPL) providers like PayPal, Afterpay, Klarna, Affirm, and many more. Factors like the rising number of eCommerce platforms and their services, digitization, rising merchant adoption of BNPL, and increasing repeat usage among younger consumers triggered lending at point of sale, a service also known as BNPL expand its footprint fast.

The global BNPL market is projected to grow from USD 22.86 billion in 2022 to USD 90.51 billion in 2029 at a CAGR of 21.7%.

Despite rising inflation and interest rates, consumer uptake of BNPL is still robust and most of the BNPL providers reported an increase in active consumers earlier this year. According to a recent study, almost 50% of US consumers said they have used a buy now, pay later service and the percentage of such BNPL service users is growing rapidly. With the increasing adoption of online payment methods, an increase in demand for delayed payments for online purchases, and a rise in spending among the adult population bought confidence among BNPL providers to partner with leading eCommerce platforms like Shopify, WooCommerce, BigCommerce, and many more.

How Technology will decide your success in BNPL?

Today, BNPL is part of the consumer buying experience. It’s crucial for both, the startups looking to launch a new BNPL service and existing BNPL FinTechs trying to expand, to understand the importance of technology for their success or failure in BNPL. According to a recent study, 67% of buy now pay later users said BNPL could replace their credit cards because of the ease at which the BNPL services give credit to people. Shifting the flow of money from big established financial institutions to newer FinTech companies excited policymakers and government regulators to show more interest in the BNPL to protect consumers and keep things under control during the economic downturn. Following are the key areas where technology can help you decide your success in BNPL:

Real-time Analysis:

BNPL providers can leverage technologies to gather sufficient data, online and in real-time, to confirm the identity and assess the affordability risks of the buyers via national databases. These advanced technological capabilities can help BNPL FinTechs perform real-time checks for ID verification, Know Your Client (KYC), Anti-money laundering (AML), credit history, and affordability checks to make digital lending and payments seamless.

BNPL and Retailer Systems Integration:

Retailers have found offering both online and in-store BNPL payment options to be an ideal way to upsell to customers, increase both conversion rates & basket sizes, and achieve business goals fast. Delivering a successful BNPL payment option will inevitably depend on how well the retailer and the BNPL provider can streamline the customer sign-up process and ensure simple one-click checkouts. With advanced technologies, regulated BNPL FinTechs can ensure quick and seamless integration with retailers’ eCommerce sites to deliver a good customer experience.

Automated Payment Processing:

Using advanced technologies can help BNPL FinTechs automate payment processing. Some of the BNPL FinTechs have their own payment processing solutions, while most of them regard it as an external process, and hence they integrate with existing payment processing solutions which dilutes their margins. Having your own automated payment processing capabilities not only gives you an advantage from a revenue perspective but also adds credibility and ensures the security of valuable consumer data for the users.

Full BNPL Lifecycle Automation:

BNPL FinTechs can use advanced technologies to automate the full BNPL customer lifecycle, including transaction approvals, automated repayment reminders, interest and fee calculations, reconciliations, debt collection processes, failed and penalty payments, credit line management, allocation of payments and repayments, and more. This will allow BNPL FinTechs to cut down long-term costs associated with operations staff at the back office.

Top and Unique BNPL Business Models in the Industry

Even though banks have been offering POS financing for a long time, they have failed to upgrade their technology to deliver an improved and personalized customer experience. In a recent survey conducted by McKinsey, about 60% of users said they are likely to use POS financing over the next 12 months. The increase in the popularity of BNPL technology involves different sets of providers and models, each with unique strategies and value propositions. We have underlined a few BNPL business models to help you make sense of this industry and explore how POS financing providers are targeting the ecosystem to meet the needs of merchants and consumers.