Even before the war in Ukraine, supply chain issues were a major concern in the European automotive industry.
But James Jackson, co-founder and CEO at U.K.-based buy now, pay later (BNPL) firm Bumper, said he was surprised to learn just how crucial the Eastern European country was for new car manufacturing, with the crisis worsening the already existing supply chain issues and forcing major auto manufacturers to curb production.
As a result, the delivery of new cars has been hugely disrupted, leading to record-high demand for used cars in the region. And because “the older the vehicle, the bigger the bills,” he said that shift has added to the financial pressure European Union (EU) households are already feeling in this tough macroeconomic environment.
It’s the reason why the ability to spread the cost of repairs, interest free, has never been a more pressing need for used car owners in Europe, who at any time could be confronted with large, unexpected car repair bills they did not budget for.
“There’s quite a lot of stats to show that Germany, the U.K. and actually most of Europe are experiencing record highs in average age of vehicles, so the need for Bumper has never been more relevant,” Jackson told PYMNTS in an interview.
And even though Jackson acknowledged their relatively small size in the European BNPL space, he said they’ve managed to carve out a niche in the automotive sector and outperformed bigger competitors such as Klarna and PayPal.
With consumers more inclined toward convenience and embracing products and services that are quick and easy to use, improving the user experience has also worked to their advantage.
“You can drop your car off in the morning, pay on your phone, approve the work and spread the cost within a couple of clicks without speaking to anyone,” he said. “It’s a fully digital experience that’s completely unique. No one else does this in the market.”
Pushing Out Larger Players
BNPL use has exploded in the past few years as more and more consumers tap into the opportunity to spread purchases in several installments. This boom has also created fierce competition in the space as established players compete with new entrants vying for a piece of the growing pie.
When it comes to the auto sector, Jackson said integrating with hundreds of dealership ecosystems is one of the strategies they’ve used to access additional, more granular data on customers from the APIs of the dealer management system, enabling them to underwrite responsibly.
To further strengthen their offering, a dedicated scorecard using machine learning and big data is used to make the lending decisions, resulting in higher accept rates and lower loan risks, he added.
That scorecard goes beyond the typical factors that most BNPL providers assess to include information on the average age of the vehicle, its value, total miles traveled and whether it passed its last Ministry of Transport (MOT) check, for example.
“Once we factor in all these additional bits of information, it gives us really unique insights into the customer and allows us to underwrite much more accurately than a more generic BNPL provider,” he noted, adding that it has enabled them to push several larger BNPL providers out of the automotive market.
Secure, Fast, Cheap Payments
Last December, the U.K.-based BNPL firm raised $12 million with the help of other automakers including Porsche and Jaguar, earmarked for expansion into new markets including Spain, Netherlands and Germany — Europe’s largest auto market.
Read more: Porsche, Jaguar Help Fuel BNPL Car Repair Startup Bumper’s $12M Series A
The FinTech firm has also launched a marketplace where drivers can search for garages within their network and book an appointment directly into the workshop calendar at any one of Bumper’s garages and dealerships — a service he said is gaining traction among dealers.
Moving forward, he pointed to open banking payments as a key trend that will transform the BNPL service in the automotive industry. “Being able to pay app-to-app, bank account-to-bank account in a really quick, secure way is going to become more and more popular, so [using] open banking payments and leveraging that technology is a trend that we’re looking to capitalize on,” he said.
And with the increase in digital fraud brought on by the pandemic and potential General Data Protection Regulation (EU GDPR) risks, “any way you can have secure, fast, cheap payments is going to be popular in the automotive industry and certainly get dealers excited,” he added.
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