Call it a phenomenon and not a passing fancy. When it comes to buy now, pay later (BNPL), banks would do well to play a bit of catch-up.
It’s no secret that the payment option is becoming more popular, and volume is expected to grow by triple-digit percentage points through the next few years. As much as 20% of the population have tried BNPL over the last 12 months, PYMNTS data found. Furthermore, 77% of millennials said that they plan to increase their use of it over the next 12 months, as do 64% of Generation Z and Generation X respondents.
See also: 60% of Millennials are Interested in Bank-Provided BNPL Plans, If Available
No matter the demographic, David Fura, head of Card Solutions at FIS, told PYMNTS’ Karen Webster that the consumer wants ease, convenience and lots of options when it comes to paying for goods and services.
Visibility into the timing of the payments (and thus a better window into their own financial health) is a prized hallmark of BNPL, as is the chance to avoid drawing down on expensive lines of credit. Merchants, too, recognize the opportunity.
Fura said average order sizes can grow by 40% or more when BNPL options are part of the mix. The banks and the merchants, the firms such as FIS and various FinTech providers, are all pivoting to meet demand as consumers become ever-more aware of, and comfortable with, different payment schemes.
To capitalize on those trends, he told Webster, “It’s important that we move fast in this industry.”
But there are late adopters in the pivot to offer BNPL, most notably the banks. As many as 70% of consumers surveyed by PYMNTS would like if their bank would offer BNPL — and while a few of them do, it is offered as more of a post-transaction experience than as part of the payments flow.
Time Is of the Essence
As Fura noted, there are three different ways to look at a transaction — before purchasing, during the purchase itself and after the payment. Banks have a range of options to engage with consumers across all of those payment subdivisions, with the aid of processors such as FIS.
Optionality will be key in getting consumers to choose BNPL across timeframes or payment methods, such as digital wallets. Among other offerings on the horizon: BNPL cards that enable consumers to use the payment option at merchants that do not have BNPL functionality.
“Consumers want all of this to be connected to digital banking,” Fura said, and will also want to see their BNPL activity broken out from other types of payment activities in a centralized, holistic view of their finances.
Related: Merchants, Take Note: Consumers Want More In-Store BNPL Options
Giving that 360-degree view of spending, along with merchant identifiers and other details, can be a complicated technical proposition for the banks.
“But with the BNPL card connected to their statements,” and even rewards and points, the BNPL landscape will evolve and become more seamless, he continued.
Looking ahead, Fura said the trajectory of BNPL might be likened to the growth of the peer-to-peer (P2P) landscape, where FinTech providers and banks will offer a range of services for consumers, connecting traditional activities and channels with digital ones.
We’re headed toward the era of the super app, and banks have an inherent advantage in that they already have relationships and trust cemented with their consumers. BNPL can provide an on-ramp for building credit and, down the line, applying for mortgages and other traditional financial products.
As Fura told Webster, “BNPL is opening the capital and credit markets to a whole new consumer base, where those options weren’t available before.”
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