First, it’s important to know that choosing a BNPL solution isn’t as simple as buying an off-the-shelf Software-as-a-Service (SaaS) product. There are many variations that cater to different needs, use cases, and risk profiles.
The first step, at the most fundamental level, is to choose between direct-to-consumer (D2C) and white-labelled solution providers. D2C fintech companies typically enter the consumer journey at checkout and initiate a direct relationship with the merchant’s customer. They also share in the customer’s data ownership and often remarket to the customer post-purchase. While the BNPL market was carved out by D2C providers such as Klarna, Affirm, and Afterpay, other players have entered the market via white-labelled solutions.
Banks, in particular, have made great strides in providing merchants with white-labelled BNPL solutions, giving the merchant full control over the user experience, customer relationship, and data.
BNPL is not a one-size-fits-all, even though it has become synonymous with the pay-in-3 (in Europe) or pay-in-4 (in the US) model. There are a wide variety of BNPL financial products available that lenders can offer consumers including installment loans, lines of credit, and split payments. The type of product offered to consumers depends on a number of factors including, for example, ticket size. High-ticket items, such as furniture, could require a longer-term installment loan, while smaller ticket items, like clothes, would be better suited to a split pay offering.
Diving in deeper, there’s also a new target market for BNPL and that’s the business-to-business (B2B) financing market. Since consumers have different risk profiles and needs than business buyers, merchants should offer specific B2B financing options to their business customers.
Lastly, something important to consider is the distribution of their BNPL solution. This refers to how quickly and easily the provider is able to bring the bank’s financial offerings to merchants and consumers. For example, does the provider offer virtual card technology and ecommerce plugins? Is there a global solution for global merchants?
We built our BNPL platform as both white-labelled and modular. This means that, while our platform is fully customisable, we don’t reinvent the wheel every time we implement a solution for our partners. Banks, lenders, and merchants that choose to use our platform can tailor their offerings according to their customer needs and their business goals.
For example, a bank that wants to scale quickly to many merchants has the option of utilising our virtual card technology, which does not require any integration with the merchant. They can also implement our ecommerce plugins for easy scalability to online merchants. Whereas another bank may prefer a simple API integration with each merchant. Our platform can support every type of use case and client requirement.
From the outset, we’ve aligned our BNPL solution with banks and traditional lenders.
This is a strategy that is deep-rooted and stems from our core values on a company level. At Jifiti, we believe in providing access to affordable and responsible financial solutions when and where it matters most.
When it comes to providing responsible financial solutions, banks and other financial institutions are the undisputed leaders. They have been underwriting loans for centuries and have unrivaled decision-making expertise. All they needed was the technology to bring their responsible financial products to the place where consumers need them most – the point of sale. When it comes to the commercials, banks are able to offer merchants and consumers the most competitive rates or transaction fees. Because they can leverage their powerful balance sheets, banks’ BNPL fees to merchants are as low as 1-3% (compared to fintech companies which can typically offer 3-6%) for split pay products, such as pay-in-3 and pay-in-4.
Regulation is another factor that positions banks as BNPL market leaders as they already operate within a regulated framework. It is inevitable that BNPL will eventually become regulated and, unlike their fintech counterparts, banks that offer BNPL will already be compliant and have no regulatory barriers to entry.
What it ultimately boils down to is consumer trust. With current economic upheavals, there is one thing that is stable – the underwriting capabilities of banks that have been doing this for hundreds of years. Banks have the trust element in their favour.
Furthermore, a single bank can often offer a much broader variety of solutions and loan types.
I believe that many BNPL providers entered the market with a broader goal in mind – to become fully-fledged digital banks. Take Klarna for example. They have essentially used BNPL as a segway into becoming a digital bank and have already leveraged their brand to launch consumer bank accounts in Europe.
BNPL serves many fintech companies as a powerful and quickly scalable customer acquisition tool. Then, once a fintech company has developed relationships with customers and earned their trust, it can then cross-sell other financial services to these customers.
With the recent market turbulence, I predict that the major fintech players won’t disappear off the map. They will simply look to diversify and deepen existing customer relationships with other financial products.
The smaller players, on the other hand, are not likely to survive the economic and regulatory crunch. With higher barriers to entry, the provider landscape will tighten up with limited new fintech players.
White-labelling means that the solution is in the bank’s and merchant’s brand, while the BNPL provider remains behind the scenes. This helps the bank and merchant build their own brands and retain full ownership of the customer relationship, without relinquishing any part of the user experience to a third-party fintech. The result is a powerful consumer acquisition tool that fosters brand loyalty and the deepening of customer relationships.
But more than this, BNPL is a source of rich customer data. Brands that use a white-labelled platform gain invaluable data insights about their customers’ preferences and behaviour.
I think that BNPL has proven that it’s not simply another payment trend. Consumer (and therefore merchant) demand is increasing (despite the current economic downturn) and the fact that Apple has announced the future launch of its own BNPL offering just cements the fact that this shift in consumer financing is here to stay.
Banks need to make their financing available at the exact time and place where customers need it most. To do this, they need to close the technology gap quickly. We’ve already seen more and more banks entering the market with a technology partner. By partnership, I don’t mean a simple plug-and-play integration. I firmly believe that deep partnerships between financial institutions and technology companies are the future of BNPL. Partnerships that are value-based and that leverage the core competencies of each partner.
What was ultimately the Achilles heel of the faltering fintech players is the fact that they were trying to do everything – both the lending and underwriting, as well as the technology.
To truly succeed at BNPL, it’s vital to keep the distribution technology separate from the lending itself. When each entity sticks to its core competencies – the banks to the balance sheet lending and the tech companies to the distribution technology – the result is an affordable, accessible, and responsible BNPL offering.
About Yaacov Martin
Yaacov Martin is the CEO and Co-Founder of Jifiti, a fintech company that he co-founded in 2011. He is a BNPL thought-leader, seasoned speaker, and active contributor to leading payments, fintech, business, and retail publications, such as The Paypers, American Banker, Business Insider, Forbes, Financial IT, and numerous others. An advocate of responsible and accessible financing, Yaacov has shared his insights onstage at top industry conferences, most notably on the Money 20/20 Keynote stage and as a BNPL panelist at Fintech Nexus USA 2022.
About Jifiti
Founded in 2011, Jifiti is a leading fintech company that powers white-labelled BNPL solutions in any global market. Through their modular platform, Jifiti enables banks, lenders and merchants to deploy any consumer financing program at any point of sale – online, in-store, and via call center. Jifiti works with leading financial institutions including Mastercard, Citizens Bank, CaixaBank, Credit Agricole, and retailers such as IKEA, Walmart, and others worldwide.
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