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

  1. Immediate credit risk decisioning and fraud detection
  2. Seamlessly integrated customer experience
  3. Ease of integration and data sharing between merchants and lenders
  4. Differentiated value proposition compared to other BNPL suppliers in an increasingly commoditized market
  5. 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

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