The velocity of buy now, pay later (BNPL) — measured in payments volume and millions of users — makes last weekend’s Kentucky Derby race look slow by comparison.
PYMNTS’ data underscores appeal and the uptake of the credit offering, which allows consumers to break up payments into equal amounts across weeks or months.
At the end of last year, PYMNTS found that 50 million consumers had used BNPL at least once in the past year. And more recently, industry estimates show BNPL could be worth as much as $3 trillion by the end of the decade, up from $125 billion today.
To log that astounding growth rate, to get the tailwinds in place, Arvind Ronta, global head of BNPL/installment at Visa, told PYMNTS’ Karen Webster that ongoing programs by the payments giant will enable unused credit lines at traditional financial institutions (FIs) to be transformed into BNPL offerings, and also help broaden the provider landscape itself.
This turns any FinTech into a BNPL provider, too, armed with the ability to underwrite the loans and issue virtual cards that can be used anywhere Visa is accepted.
Read more: BNPL Industry Expected to Be Worth $3T by 2030
The FIs and the FinTechs that want to offer installments, who want to ride the wave — and stoke the flames — of BNPL appeal have a heavy lift ahead of them.
As Ronta noted, “There are multiple gaps that exist today because a ‘mature tech stack’ does not exist — and everyone has been trying to build it.”
At a high level, for consumer, being presented with an installment offer on an existing credit card represents an attractive value proposition. Those same consumers, said Ronta, know and trust the safety and usability of their Visa credentials across online and offline channels.
But in enabling the flexibility that comes with offering credit without interest payments means that providers must identify consumers from their debit or credit credentials to ascertain whether they are qualified for installments (based on spending and credit capacity, among other metrics). The infrastructure must help shepherd the loan from underwriting to processing to acceptance.
The conversation came against a backdrop in which Visa said it has gone live with its new installments partner portal, officially named Visa Ready for BNPL. It’s an announcement that follows the launch of its credit installment pilot nearly two years ago.
Read more: Visa Launches Visa Installments Pilots in the US
The payments network said that it has 20 partners already on board. The partners that are live include Canopy Servicing, Cybersource, Equinox, Everyware, FIS, Global Payments, i2c, Juspay Technologies, Marqeta, ONTAB, Peach Finance, Provenir, Quest Payment Systems, Skeps, SplitIt, Sutton Bank and Visa DPS.
“We are supporting all sides of the ecosystem — and enabling them to offer installments — in a seamless way during the purchasing experience,” Ronta said.
The pure play BNPL firms can be among those clients, he said. Some of those tech-nimble upstarts are facing capability gaps of their own, where they might be looking for a bank sponsor or a processor.
“The partner program would allow us to bring those enablers, with their own capabilities, and help those FinTechs extend their lines to ‘open loop’ acceptance for all merchants,” he said.
Or in another example, a traditional issuer may need help creating a tech stack from the ground up and need depth of platform capability and experience on offer from Visa.
In terms of mechanics, the portal will help FinTechs and select issuers with Visa’s “vetted” partners to fast-track implementation and scalability of Visa’s BNPL offerings.
For larger issuers, Visa has provided a plug-and-pay solution where they can enable the existing card members to have installments tailored to their credentials, he said.
He noted that the consumer’s credential will determine if they are eligible for an installment offer, and the consumer can see what offers they have available from the issuer at the point of sale (POS). The model is extensible across eCommerce, in-store, cross-border and domestic transactions.
“This is the ubiquity that we want to bring to the market,” Ronta said.
Benefits of Optionality
Ronta noted that optionality has positive ripple effect across the ecosystem — and broadens the appeal of BNPL.
“It’s not a matter of if those services are offered — it’s a matter of how they’re offered by the traditional banks,” he told Webster.
Enabling BNPL in an app is not the same as enabling the option at the physical POS. Customers are different, the disclosures can be different too.
Optionality and personalization also have benefits for the merchants. Ronta said a significant percentage of issuers set up post-purchase installments — but with pre-purchase and at-the-moment of purchase options, the customer knows what they’re buying, what they’re getting installed for what terms.
A range of offers can help inform the purchasing decision — and where it is the installment offer that incentivizes them to pull the trigger, so to speak, and close the sale.
The portal rollout comes in the wake of several BNPL launches stretching back over several months that show rollouts and roadmaps. Larger issuers may want to enable large-ticket, longer-tenured loans (such as for durable goods or home improvement). Issuers may find that BNPL offers a bit of an on-ramp to more traditional, revolving credit relationships over time.
As BNPL evolves, and as FinTechs and issuers look to fast-track implementation, Ronta told Webster: “One thing is clear: BNPL is here to stay.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More