How Buy Now, Pay Later can unlock growth for banks and retailers
BNPL is a short-term financing option which allows customers to purchase products and pay for them in the future – at zero or low interest. BNPL has surged through the pandemic. Today’s customers are demanding more connected experiences and greater levels of convenience and personalisation. This has created a major opportunity for new digital payment options.
Three factors driving growth
1. Consumer demand for convenience and affordability
Gives consumers a feeling of deferring payment and the power to easily try-out a product with no financial outlay at the time of purchase. BNPL adoption is growing steadily across Gen Z, millennials and Gen X.
2. Top-line growth and merchant adoption
Widespread merchant adoption is a key driving force of BNPL’s success. Merchants typically experience growth through sales conversion and basket size.
3. Accelerated market traction
BNPL accounted for 2% of global e-commerce in 2020 with the highest adoption in mature markets. Market share is expected to double in 2024 (Source: Worldpay, Global Payments Report, 2021).
Banks and retailers need to investigate what kind of BNPL model to implement. Possible scenarios include:
- Merchant only
- Checkout
- Aggregator and checkout
- Merchant agnostic
Banks could lose out on revenue by simply not acting; it is estimated that BNPL fintechs have already diverted US$8-10 million of annual revenue from banks.
Five key design principles for a successful BNPL offering
- Immediate credit risk decisioning and fraud detection
- Seamlessly integrated customer experience
- Ease of integration and data sharing between merchants and lenders
- Differentiated value proposition compared to other BNPL suppliers in an increasingly commoditized market
- Proactive marketing and branding between the end-customer, merchant and lender
Download the full report at www.mambu.com/insights/reports/the-deloitte-and-mambu-guide-to-buy-now-pay-later
