A new white paper from European digital payments leader Worldline argues that financial institutions and merchants should take advantage of Open Banking’s power to unlock and grow Buy Now Pay Later (BNPL) payments for new revenues, better service and enhanced customer loyalty.
BNPL for banks and merchants
The growth of Buy-Now-Pay-Later schemes in Europe has affected financial institutions’ payments revenues in recent years.
Figures from the latest Digital and Card Payment Yearbooks by PCM[1] show credit card numbers and usage dropped during the pandemic despite a 30% increase in e-commerce spending as customers flocked to BNPL for their POS and online shopping needs.
According to PCM’s data, the number of credit cards in France remained flat between 2020 and 2021, declining 6.4% over the last five years.
Other Western European markets such as Spain witnessed equally dramatic declines (12.9% over the last five years), while markets that are still in ‘growth’ mode, such as Belgium, Austria and Italy, recorded increases of between 1 and 3% in their credit card portfolios.
Buy Now Pay Later rising
If credit card revenues have remained flat, then growth in Buy Now Pay Later has been spectacular.
Kaleido Intelligence[2] estimate the global BNPL market was worth €125 billion in January 2021, and project total market value of €350 billion by 2025, for year-on year growth of almost 23% over the next seven years.
Worldline’s latest white paper says financial institutions and merchants must adopt Buy Now Pay Later or risk seeing their margins and customer relationships eroded.
“Regulatory pressure to treat BNPL like traditional credit products creates an opportunity for trusted financial institutions and merchants to enter the market.”
At the same time, regulatory pressure to treat BNPL more like traditional credit products is creating an opportunity for regulated financial institutions and established merchants to enter the market as they enjoy the trust of their customers and have access to customer records and purchasing histories.
Worldline’s white paper says access to this data, when coupled with the provisions of Open Banking, gives financial institutions and merchants the opportunity to offer a wide range of BNPL options at lower cost and risk.
The paper explains how banks and merchants can use API calls to gather and assess financial data, make rapid and accurate credit decisions and offer BNPL arrangements at more competitive rates than existing BNPL specialists.
Other advantages enjoyed by banks and merchants offering BNPL powered by Open Banking include lower transaction costs (by managing instalment payments through open banking PIS payments) and working with specialist third parties to include processing, risk management and systems integration services that deliver secure, rapid BNPL services at competitive rates.
To find out how your company can unlock the power of Open Banking to deliver competitive BNPL services, download the new white paper from Worldline.
[1] See www.paymentyearbooks.com
[2] See S&P Market Intelligence, “Could banks still get into the BNPL market?”
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