Banks Start 2023 Giving Retailers and Consumers New BNPL Options

As they navigate a period of economic uncertainty, Americans are increasingly turning to buy now, pay later (BNPL) tools.

An emergent suite of next-generation, flexible financing solutions are helping consumers weather rising inflation and meet financial goals within an ever-changing, rarely positive, macroeconomic environment.

PYMNTS’ research shows that 52% of consumers tried a new payment option last year, with 59% of those options reliant on digital wallet use.

BNPL solutions are poised to capture a large portion of this future global spend as the contemporary landscape’s ongoing digital evolution continues to transform the way consumers shop and pay for goods and services.

Cash-strapped businesses have even jumped on board as well.

Galileo Chief Product Officer David Feuer told PYMNTS about the launch of his company’s latest customizable BNPL product for banks and FinTechs and how he sees digital payment solutions as the spear-tip of consumer-first innovation.

Providing More Spending Power to Customers

“When we think about how customers connect with their money, and how we help them make better decisions around that, that’s something that’s exciting to us,” Feuer said about the new product.

The goal is to empower customers to take a different approach and make different decisions around credit and around access to cash flow through lending solutions from partner banks and FinTechs.

“Even though this is a credit product, it’s separate and different from a credit card and has different implications around interest, so we see customers taking a completely different approach to leveraging it, being more proactive about their decisions,” he said.

Economic contractions across the current environment, which many observers see as leading to a fast-approaching recession, have put cash management and short-term flexibility needs front-of-mind for all consumers.

Galileo’s new solution offers a frictionless way for financial institutions (FIs) to enter the BNPL market, while simultaneously providing consumers with increased spending power that is geared toward thoughtful, rather than impulsive, purchases.

“There are a number of solutions in the market, so we really tried to take a different approach,” Feuer said. “Rather than being an impulse purchase when [consumers] are going through an eCommerce checkout flow, what if it was an offer from a bank for a single-use credit product? It’s something we think is different and offers considerable value.”

A New Approach to BNPL

Nonbank BNPL providers operate with comparatively limited customer data, putting both the provider and the consumer at higher risk of issues that range from default to fraud.

What Feuer said Galileo is trying to do with its new product is to empower banks, neobanks and FinTechs to offer better and less risky loans by leveraging richer customer data for decisioning and providing flexibility in how a loan can be structured.

“We look at everything — the payment terms, the repayment schedule, how many payments, what is required upfront, how the credit box looks — and we make it an environment where all of that is customizable, where the FinTech or neobank offering the loan are able to have whatever parameters necessary to build out a customer experience that best meets their needs,” he said. “That’s a little bit of a different approach than what anybody else in the market has been taking.”

Galileo is responsible for managing and servicing the loan, including overseeing the repayment schedule, managing disbursement to the issued virtual cards, ongoing assessment of interest and fees, as well as handling the payment processing, charge off and optional credit reporting.

“Banks know how to give loans, and they know how to offer loans,” Feuer said. “They are in the business of serving their customers, and if the customers aren’t happy with the products being offered, then there’s no value proposition. I feel like this is one of those win-win-win situations where the product works for everyone: Galileo, the bank and the customer. Being able to use data in a way that’s constructive and beneficial to everyone is something unique.”

As consumer behavior around both discretionary and non-discretionary spending continues to be buffeted by economic headwinds, Galileo’s product is well positioned to help ease some of the considerable financial pain consumers are feeling.

SoFi, Galileo’s parent company, rolled out a more traditional “Pay in 4” BNPL offering for its own eligible members in December.