Buy now, pay later (BNPL), or POS financing, refers to services that facilitate payments between merchants and their customers or suppliers via a short-term, typically interest- and fee-free installment plan.
Listed below are the top BNPL predictions, as identified by GlobalData.
In 2020, the development of BNPL services will result in a host of new fintechs typically calling themselves payments platforms, as their focus is on making money from the transaction rather than the extension of any credit. They will be quick to market, as they will not need a banking license and many won’t need a credit license either.
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These players will continue to disrupt millennials’ use of credit cards and traditional loans as the amount of paperwork, time, and opaque fee structures frustrates users. POS lending is far more consistent with the digital experience that this demographic expects, akin to that offered by best-in-class online retailers.
However, as a relatively early-stage product, tighter regulation may be forthcoming. Australia, for example, is a relatively mature market for BNPL with as many as 30% of Australian adults now having one or two BNPL accounts – that’s roughly 5.8 million users nationally. But the payment platform still isn’t subject to any regulations, like the National Credit Act and Code, requiring BNPL providers to meet responsible lending obligations.
This may change in 2020, in Australia and other mature markets, as regulators step in to tighten the rules, whether around regulating fees or ordering providers to perform more extensive credit checks before approving users. This could mean a tougher application process and stricter spending limits for consumers, hacking away at that UX advantage, something incumbents might well lobby for.
Other major banks will launch consumer lending POS arms as they realise the opportunity. JP Morgan Chase launched My Chase Plan in 2019 to allow card customers to select from past purchases of more than $500 and finance them over an extended period with monthly fees rather than interest payments.
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By GlobalDataThe evolving ecosystem will bring new unexplored opportunities for banks and encourage them to move beyond traditional products to meet changing customer needs. Banks will collaborate with their fintech and regtech counterparts for both POS financing and unsecured consumer lending.
There are several online lenders that license their software to banks, including Kabbage and Upstart. Blend, Figure Technologies, and Amount, a spinoff from fintech lender Avant, all expect to increase the number of banks they work with to provide better and faster experiences.
This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.
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