What Is BNPL? Let's Clear The Air!
It's All About Bnpl
The Buy Now Pay Later (BNPL) financial service started its conquest of the US and Western Europe a few years ago and now it is present in more than 30 countries.
BNPL is an innovative payment and credit solution that can serve the customer at the point of purchase, in real-time, without interrupting the purchase process.
It is an online solution that can be used in minutes, conveniently, without paper, and without face-to-face meetings, a digital alternative to traditional merchandise credit.
When a customer makes a purchase, they do not pay for goods and services immediately, but split the payment into a number of instalments (typically 3-4) and make them at set intervals (typically monthly).
The justification for this is reinforced by the fact that the amount of money consumers have available to spend has declined in recent years due to economic conditions, and as a result, segments of consumers who previously did not have access to instalment solutions are now seeking and demanding them.
BNPL, BUT WHICH ONE?
At this point, it is important to clarify what we mean when we talk about BNPL, as we can distinguish between 4 different operating models:
Card Issuers' BNPL: Subsequent breakdown of the purchase price into instalments by card issuers
Direct BNPL: An instalment solution provided by independent operators directly to merchants under the brand of the service provider
Own-brand merchant instalment: An instalment facility provided by the merchant under its own brand without the involvement of a bank or financier
Own branded instalment with external financier: An instalment with an external financier, aligned to the merchant brand
IS THE TRADE CREDIT ALSO BNPL? OR NOT?
In our qualitative comparative analysis, we examined the processes and business criteria of available merchandise credit products and BNPL solutions.
A: Methodology
The evaluation, and thus comparison, is based on test purchases across all commodity lenders and BNPL providers.
This involved real-life applications in online stores and an objective evaluation of each provider's solution.
The objective scores were used to aggregate and average the merchant lending and BNPL solutions separately.
B: The evaluation
it is not new, but it is a fact that all merchandise credit is available online, it is important to see that nowadays, internationally, the measure is no longer whether E2E processes are online or not
the results of the test purchases show that
the application process of any provider is not uninterrupted
there are some, where the checkout is followed by a short data capture and then, after a video call, the final credit application is done in a separate application
some have a more extensive data capture after checkout, followed by a phone call to arrange a pre-approval appointment
there is currently no automatic, real-time adjudication solution, some take as little as 40 minutes to adjudicate, but some take more than 10 times that
all solutions require personal identification (video call)
for all BNPL solutions, it is true that
uninterrupted processes, there is nothing to stop the application after check-out
real-time review and no live personal identification was required
In summary:
Buyers have a demand for instalment payment processes
Conversion rates for BNPL solutions are up to 3.5x better than commercial loans due to the uninterrupted process and instant judgement
The BNPL process from application to decision takes up to a few minutes, whereas with commodity loans it can take hours or days
BNPL can bring in new customers, even those who would not use a commodity loan
