In the next ten years, the value of the global Buy Now, Pay Later (BNPL) market is expected to increase five times over, rising from $15.8 billion in 2023 to $76.5 billion by 2033.
Driven by a significant shift in how people want to shop and pay, businesses involved in any form of eCommerce are looking to capitalise on this trend. After all, harnessing BNPL effectively can prove key in enabling businesses and brands to attract new customers.
But, adding BNPL to the payment options at checkout is no silver bullet. Understanding your customer and their needs is the first step. Next, how and where BNPL is embedded into the customer journey will go a long way to determining the success of a deployment.
To help potential adopters at the start their BNPL journey, here are three important questions to consider:
- Should you choose a BaaS-powered embedded BNPL product, or third-party solution?
Banking-as-a-Service (BaaS) has opened up a new world of opportunities for non-financial businesses, enabling them to embed financial solutions into their ecosystems. BNPL, and payments more generally, have been the foremost use case of BaaS-powered embedded finance.
However, businesses looking to adopt BNPL solutions have a choice: work with a BaaS provider to implement their own white-labelled solution into their customer journey, or use a third-party ‘off-the-shelf’ solution.
Doing the latter might accelerate speed to market for businesses keen to quickly add BNPL to their checkout options, but it comes with potential drawbacks. Using a third-party BNPL product typically means a customer has to leave the website or app to complete the purchase, affecting the business’s ability to create a seamless customer experience within their ecosystem. Alternatively, a BaaS solution fully embeds banking products into the brand’s customer journey.
- What should the terms of your BNPL products be?
BNPL can come in many forms, and businesses have to ask themselves:
- Which products can BNPL be used for?
- How many instalments should payments be split into? Over what length of time will those instalments be spread?
- How much interest, if any, will be charged?
Understanding their specific customer needs, and choosing the right partner can ensure BNPL is offered in the way that makes sense for their business.
- How will fraud, risk and compliance be managed, and who by?
Embedded finance solutions are banking products, meaning adopters need to ensure that their products are secure and compliant. BNPL is no exception – it is a form of credit, and those offering it must ensure risk is managed carefully.
This means BNPL adopters must carefully consider how fraud, risk and compliance will be managed. Whether opting for a BaaS partner or third-party solution, businesses have to ensure their chosen provider actively mitigates risks through robust credit assessments, advanced fraud detection mechanisms, and proactive monitoring.
For those seeking a BaaS partner to deliver a BNPL solution, there are important distinctions to note where compliance is concerned. For example, some may only be regulated as Electronic Money Institutions (EMI), limiting the ability to offer lending products like BNPL. Others, like Aion/Vodeno, offer a comprehensive range of services based on a full banking licence, with end-to-end service and all regulatory requirements handled in the back end.
Again, BNPL is credit, meaning it falls under the ‘embedded lending’ category. Such products are more complex due to evolving regulatory and compliance requirements. Having absolute clarity over a BaaS provider’s licence and risk and compliance abilities is a must.
Get in touch with Vodeno today to learn about our BaaS-powered embedded finance solutions, including BNPL, and how they could transform your business.
