Transforming Banks into BNPL Pacesetters

September 30 , 2021

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This is a reprint of a feature that originally ran in the PYMTS.com Q3 Executive Report: The Way Payments Are Now Done on September 30, 2021.

 

Transforming Banks into BNPL Pacesetters

No doubt the physical constraints and financial insecurity brought on by the global pandemic last year set the stage for today’s rapidly increasing adoption of Buy Now, Pay Later (BNPL). While not a new concept, BNPL options became more attractive to cash-conscious consumers seeking alternatives to unfavorable short-term credit offerings. With increased transparency, the ability to even out cash flow and budget over a clear period of time, BNPL fits the bill. Literally. 

Fast forward to today, having been the only unsecured-lending asset class to experience high-double-digit growth during the pandemic, BNPL is now a booming marketplace, one that is expected to capture  $995 billion of consumer spend by 2026 – four times BNPL’s 2021 projected volume. 

But most financial institutions aren’t banking on that BNPL revenue. Well, not yet.

According to McKinsey’s Consumer Lending Pools data, banks stand to lose up to $10 billion in annual revenues to the ever-expanding roster of merchant-centric fintechs that are capitalizing on financial institutions’ inadequate response to increased merchant demand for timely and flexible customer payment options at the point of sale.

So, as I see it, there are billions of reasons why banks need to get in the BNPL space. Which is exactly why Amount is helping our bank partners do just that.  

Right now Amount is one of the few fintech companies in the U.S. working directly with large financial institutions to empower them to compete and win in BNPL. Hampered by inefficient and inflexible infrastructure, banks are struggling to provide merchant partners with timely and best-in-class BNPL options that drive greater conversion, average order size and repeat purchases. 

Yet when you consider existing BNPL providers, the options aren’t that great for merchants. Typically, fintechs charge merchants high fees as a percentage of the purchase amount or high flat fees per transaction. Plus, most of the big name BNPL players aren’t white-labled, which is pivotal to driving long-term brand loyalty.

We realize that the only way banks stand to win against the BNPL providers is to beat them at their own game with more value, convenience and security, which banks are inherently positioned to do. Banks’ lower cost of capital translates to better rates and greater savings for merchants and consumers. And heavily regulated and compliant by nature, banks are better-equipped to meet looming BNPL regulations.

By empowering our bank customers with a modular and flexible BNPL solutions platform, they can embed white-labeled BNPL products within a merchant’s checkout journey, creating seamless, friction-free payment experiences that turn customers into high-value brand loyalists. It’s a win for the customer. It’s a win for the merchant. And it’s a win for the bank. 

While fintechs may appear to be winning at BNPL, it's still early innings. And most banks have yet to even get in the game. With Amount, that’s all about to change.

 

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To learn more about BNPL and how to find the right fit for your organization, read our recent post

Buy-Now-Pay-Later Partnership Models: Which Is Right for Your Financial Institution?

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Transforming Banks into BNPL Pacesetters

Posted by Adam Hughes on September 30 , 2021
Adam Hughes
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Topics: Thought