Banks Use Data, Deep Pockets and Trust to Prep BNPL Entry

BNPL, i2c, banking, bank BNPL

They’ve waited — and they’ve watched.

Ava Kelly, chief product officer at i2c, told PYMNTS that banks, after observing digital upstarts, are now fully ready to embrace buy now, pay later (BNPL) initiatives while playing up their competitive strengths.

The potential market for BNPL, she said, tops $5 trillion.

“For the banks, this is an opportunity to remain top of wallet for their customers, and they already have the customer base in place,” Kelly said. “They need to fend off the neobanks that are making inroads into the BNPL space.”

The path has been at least partially paved by the banks’ digital-only competitors. The FinTechs, she said, have provided “proof of concept” that BNPL is something that customers want — and for the banks, then, it simply remains for them to get up to speed and enter that new market.

“BNPL can be used at different stages of a purchase, across different customer profiles and products — and across eCommerce,” she said.

If they execute well, Kelly said, “There is the opportunity for the banks to create additional sources of revenue — and they can do that with new customers, especially the younger generations.” With the debit and credit populations already firmly in hand, she said, there’s a chance to target and gain the business of the most entry-level, would-be clients.

She added that BNPL might conceivably be the product that comes as an introduction into the official banking relationship. It can set the stage for the use of secured cards, and eventually traditional credit cards, all while building customers’ credit scores.

PYMNTS’ own data shows that interest and use of BNPL cuts across demographics, with 50 million individuals having used the payment option in the past 12 months.

Having relatively deeper pockets can be a boon, she said, as banks are well-capitalized and can extend larger installment loans, perhaps over a longer time-frame, than FinTechs can.

Kelly added that to craft an optimal BNPL strategy, banks need to consider investing more of their resources in analytics to sharpen their go-to-market activities and to educate their members. With data and analytics in hand, the banks can engage with consumers at the pre-purchase stage — and prod them to think about BNPL before the point of sale through virtual card issuance.

Beyond Individual Consumers

Beyond the individual consumer, Kelly said, “There are a lot of ways small businesses can find BNPL useful, too.” Installment loans can help smaller firms manage cash flow as they purchase inventory or make emergency repairs to existing equipment.

Whether engaging with individuals or business banking clients, banks can leverage — and build on — the trust factor that permeates interactions with end customers.

“The banks can talk about trust, about convenience — where they can integrate BNPL into existing card products,” she said, “and having ‘regular’ customer support channels can be important to customers, too.”

The demand is there and the technology barriers have been removed so all the banks need to do is find the right technology solution, Kelly said. She added that as 2020 winds on, bank participation in BNPL is poised to accelerate.

“They’ve been wading into the pool and now you are going to start to see them swim,” Kelly predicted.