Recent years have seen stratospheric growth in BNPL around the world and across Europe, with Grandview Research predicting the global market will reach €17.9 billion by 2028, representing year-on year growth of more than 22%.
Going beyond received opinion, Nets research reveals BNPL isn’t just for cash-strapped Millennials: customers of all age groups are now turning to BNPL, with use in the over-55 segment up 17% over the last two years.
In our new white paper, we argue leading retail banks can benefit by offering Buy-Now-Pay-Later (BNPL) solutions to help them cement customer relationships, unlock new revenue and create strategic opportunities.
What it means for banks
In our new white paper we show how this growth has affected banks. Firstly, credit card use has flatlined or declined in many European markets despite a huge surge in online spending during the pandemic as customers turn to BNPL for their credit needs.
Secondly, banks risk seeing their customer loyalty decline as companies such as Klarna apply for banking licenses and seek to encroach on traditional bank product areas like current accounts, mortgages and personal insurance.
To combat this threat to their margins and, longer term, their core business, we argue banks must act. The good news is that banks hold aces up their sleeve in the form of the customer loyalty they enjoy, their status as regulated entities (we predict BNPL-only players will face significant regulatory headwinds in the next 24 months) and, most of all, their in-depth knowledge of customer’s spending patterns and credit histories.
Banks hold the aces, but need to deal
We argue these factors put banks in a strong position to offer BNPL at lower cost compared to existing BNPL players, using internal credit scoring methodologies to offer customers the right level of credit at an appropriate price.
Furthermore, banks have the option to be creative, offering new kinds of product such as splitting credit costs between credit cards and BNPL, putting recurring payments on a BNPL line, and others.
As they already hold strong relationships with their customer base, banks can present consumers with a 360-degree view of their overall credit obligations, rather than just their BNPL debt. Our research suggests this is something European consumers are looking for as they seek to manage their credit obligations.
By acting now, banks can unlock and grow new revenue opportunities and protect their core business against the longer-term threat posed by BNPL firms.
Just as importantly, BNPL offers banks the chance to take another step along the road to full digitisation, making them as flexible as the so-called “giant pay” wallet schemes coming out of the US and Asia (WeChat, Google Pay, Apple Pay and others) and, of course, the BNPL players themselves.
For decades, banks have excelled in providing a safe and trusted resource for consumers thanks to their risk management expertise and regulated status.
They also have the advantage of owning customer relationships and holding their customers’ credit information. However, they now face a challenge from competitors with nimble, fully-digital technology stacks and the ability to innovate at speed – as evidenced by the rise in non-bank BNPL products.
To meet this challenge, banks need a partner with the technological expertise to help them get to market fast and focus on what they do best: engaging with customers and building on their existing relationship as a trusted provider.
To find out more about how BNPL will benefit your customers and your bottom line, download our white paper here.