'In today’s turbulent economy, consumers and merchants can bank on banks for stable, responsible, and affordable financing at the point of sale.'
Buy Now, Pay Later is here to stay as a mainstream payment method - the industry isn’t dying, it’s simply shifting towards bank-driven BNPL solutions. One powerful piece of evidence of this is the fact that Apple recently launched its own BNPL offering, Apple Pay Later. This move is a significant vote of confidence in the staying power of Buy Now, Pay Later.
Another key indicator is that consumer demand is going strong, with 53% of consumers planning on using BNPL services over the next 12 months. The industry is predicted to reach USD 1 trillion in annual transaction value by 2025.
So, while the macro-economic and regulatory climate is certainly affecting the fintechs themselves and their ability to provide competitive BNPL solutions, it does not equate to a drop in consumer demand for BNPL. On the contrary, interest rate and inflation hikes drive consumer demand for pay-over-time options.
Market sustainability doesn't have much to do with the service itself - it has to do with the one providing that service and whether or not they can support a healthy business model for it.
Unlike fintechs, banks are not dependent on external investment for their lending funds, so they’re more likely to weather the economic storm. While fintechs are likely to curtail their approval rates and increase their BNPL merchant fees, banks and their offerings will remain largely unaffected. This is because banks have well-established balance sheets and can leverage their low cost of capital to offer competitive point-of-sale financing. Banks are also not solely dependent on BNPL for their existence.
Another factor in favour of banks is the fact that they already operate within a regulated framework, so they won’t be constrained by upcoming BNPL regulations. Regulatory pressure is good news for banks as it means a shift in demand towards responsible financial options from regulated financial entities.
With a white-labelled BNPL solution in hand, banks can play to their inherent strengths and brand equity and leverage the trust that consumers have for their services to become BNPL market leaders.
One of Jifiti’s key differentiators is that we enable banks to compete in the BNPL space using our white-labelled platform. Merchants can easily embed the consumer loan programs offered by these regulated financial entities directly into their point-of-sale or online checkout. This allows them to offer the best service and user experience to their customers.
Many merchants aren’t aware that, with the following two features, they can build their brand equity and customer loyalty, in addition to maximising their customer conversion rates.
When the BNPL solution is white-labelled, branded for the merchant, and embedded right into their customer journey, it works as a booster for the merchant’s brand. Direct-to-consumer fintechs tend to distract and divert the consumer from the merchant’s own user experience, but a white-labelled solution enables the merchant to retain customer loyalty.
Another essential feature is multi-lender with waterfall. With a multi-lender solution, if a customer’s BNPL application is not accepted by the prime lender (bank or tier-1 lender), it ‘cascades’ to a waterfall of secondary lenders. Merchants can increase their BNPL acceptance rates by up to 85% this way.
Higher acceptance rates can not only translate to more sales, but also to stronger brand equity. When customers are approved for point-of-sale financing, they have a positive retail experience. If the solution is both multi-lender and white-labelled, they’ll associate this positive experience with the merchant’s brand.
I predict the pendulum will swing back to banks and traditional lenders (it’s already starting to happen). I think that tech companies will stick to the technology aspect of BNPL, while banks will focus on lending, the space where they really shine.
For merchants and consumers, this means easier and more convenient access to consumer financing programmes from banks. Banks will need to transform their consumer lending and make it available at the moment and place where consumers need it - at the point-of-sale.
BNPL has become a must-have instead of a nice-to-have, as consumers expect it as a payment method at checkout. Banks and lenders that want to be relevant and competitive in the BNPL space can do so quickly and effortlessly by partnering with the right technology company. As a facilitator of white-labelled point-of-sale financing solutions, Jifiti is positioned to be front and centre of the evolving BNPL space.
BNPL presents an opportunity for banks to become part of the 'checkout page experience'. This can open doors to a more direct relationship with shoppers, even if they aren't bank clients, something which has never been possible before.
This interview was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.
Yaacov Martin is the CEO and Co-Founder of Jifiti, a global fintech company that he co-founded in 2011. Yaacov is a subject matter expert on BNPL and a contributor to leading financial, fintech and retail publications including The Paypers, American Banker, Business Insider, TechCrunch, Forbes, and numerous others.
Jifiti is a leading global fintech company that powers white-labelled Buy Now, Pay Later solutions for banks, lenders, and merchants. Jifiti provides cutting-edge technology and innovative solutions for regulated financial entities and merchants to compete in the growing BNPL market.
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