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Open Banking will enable faster, fairer credit checking for BNPL

Buy Now, Pay Later (BNPL) has been a payments phenomenon in recent years – however, regulators are now looking at more stringent legislation to protect consumers.

While the success of BNPL has been a global phenomenon, Western European markets have been among the most enthusiastic adopters with markets such as France and Germany recording growth rates of up to 60% on an annualised basis – Gavin Copeland, Product Manager Digital Services from Worldline argues Open Banking can enable faster, fairer credit checks and help new regulations achieve their objective.

Concerned by the very rapid growth of what remains, at present, a largely unregulated product, regulators in the EU and UK have signalled their intent to introduce legislation bringing BNPL closer to the regulatory regime for credit products such as cards and loans.

As we argue in a new white paper, Europe’s merchants and financial institutions can take advantage of the provisions of Open Banking to deliver faster, fairer credit checks.

At present, the credit checking process can still require scanned paper documents including tax returns, pay slips and bank statements.

According to research from SalesCycle1, up to 75% of applicants abandon their credit applications when faced with such onerous requirements.

Furthermore, these complex credit checks go against the essence of BNPL, which has built its success as an industry on a low-friction application and checkout process.

Open Banking unlocks the door to BNPL

Europe’s advanced Open Banking environment provides an opportunity to reduce complexity and decrease costs in the credit check process. For the consumer, application processes are easier and faster, and credit checks are more accurate, while lenders benefit from richer data, and confidence in a more accurate credit check based on relevant data.

Our new white paper, BNPL: the next opportunity in Open Banking and Digitalization explains how lenders can ask borrowers, when they apply for credit, to share information from their recent credit report via a Third Party Provider, or TPP.

This data can be analysed rapidly to highlight risky behaviours such as excessive gambling, overdraft fees and rejected payments and allow lenders to more accurately assess a borrower’s ability to pay.

By taking advantage of the new powers afforded by Open Banking to offer lower-cost, lower-risk credit checking in BNPL, banks and merchants can widen the portfolio of services they offer customers, increase customer loyalty and unlock new streams of profitable revenue, attracting new customers and delivering to their existing customer base.

Fully compliant with PSD2 legislation across the EU and UK, Worldline offers a suite of solutions that make digital lending faster and fairer, whether that’ s BNPL, a personal loan or even a mortgage.

Our suite includes credit checking, KYC, payment processing and the capacity to integrate with your existing systems.

Worldline can help you deploy your BNPL product at physical point of sale, online, via a digital wallet or card and as part of an account-to-account solution.

We also help merchants and financial institutions to establish recurring and instalment payments options related to both credit cards and BNPL.

Download a copy of our new white paper, BNPL: the next opportunity in Open Banking and Digitalization, to learn more about how Open Banking will unlock BNPL for banks and merchants.

[1]SalesCycle marketing report 2019


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