“Buy now, pay later will become an essential part of the consumer credit market.”
Martyna Szczepaniak, EMEA credit manager for PayU, told PYMNTS that the dizzying rise of buy it now, pay later (BNPL) can be viewed along two dimensions: how the alternative payment method meets consumers’ needs , as well as the benefits accruing to the merchants themselves. Along the way, she said, it will increase inclusion in Europe, the Middle East and Africa (EMEA), especially among younger consumers who don’t have access to traditional financial services products.
Getting a little more specific about consumer needs, she told PYMNTS that “online shoppers are becoming more and more tech-savvy – they want convenient, seamless payment methods that make payment almost invisible.”
BNPL meets these needs, she added, as it offers real-time online credit, simplified by a short credit application process that is done at checkout rather than after purchase. “The customer doesn’t need to decide whether they have money in the account or which cards to use,” Szczepaniak said. “They can just focus on the shopping experience itself.”
Skyrocketing transaction values
It is therefore not surprising that BNPL’s transactions, currently around 200 billion dollars, can reach up to 800 billion dollars in just half a decade.
Greater availability also promotes greater financial inclusion, she said, providing access to credit for unbanked populations that would not have been available before. BNPL is proving particularly appealing to younger consumers who are used to doing just about everything online, many of whom don’t have a credit card.
“There’s real value in having fee transparency,” she said, “and having the ability to monitor spending.”
Merchants themselves are seeing increased sales conversion and basket values which with credit solutions can be up to 10x higher on average than with other payment methods, Szczepaniak said. . The positive impact is recurring, as around a third of consumers are willing to offer repeat customers to the merchant who offers BNPL options at checkout.
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Yet despite BNPL’s growing popularity, Szczepaniak said the green space opportunity is significant because penetration is low as a percentage of transactions – just 3% in the United States, for example, where regulations are relatively strict, and up to 10% in Australia.
The question of security
Asked by PYMNTS how BNPL might compare to credit cards at a time when security remains a priority, she was quick to note that BNPL’s moniker extends to a wide range of products, which can, in turn , vary from market to market. market basis.
This variation can also be seen with regulations, she said, as authorities around the world grapple with how to close the gaps between the BNPL and traditional credit cards, which have existed for decades and are indeed heavily regulated. She said developing these regulatory regimes could be difficult, but will be necessary to protect the interests of stakeholders.
None of this is to say that traditional financial services players – including banks – are missing out on the BNPL opportunity, even if they have been a little late.
Banks have ample opportunity to compete with FinTechs that have dominated BNPL and in doing so capture revenue share, Szczepaniak said. Banks will also seize some opportunities in the consolidation looming for the BNPL sector, she added (funding costs are high and some players are facing macroeconomic pressures). Providers like PayU, she said, can work with traditional financial institutions and FinTechs to build BNPL ecosystems across geographies.
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As young consumers choose to start their financial journey with FinTechs in general and BNPL in particular, she said it was important to ensure that these offerings establish a credit history that can be shared with traditional lenders.
“Collaboration between banks and FinTech players is important enough just to avoid exclusion in the future,” she told PYMNTS. We are heading into an era where BNPL suppliers will need to be nimble in meeting the challenges and seizing the opportunities of digitalization.
“The BNPL space is still in its infancy,” she told PYMNTS.
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