BNPL Seen as Financial Inclusion Tool Across EMEA

“Buy now, pay later is going to become an essential part of the consumer finance market.” Martyna Szczepaniak, EMEA head of credit, for PayU, told PYMNTS that the heady ascent of buy now, pay later (BNPL) can be viewed along two dimensions: the way the alternative payment method meets consumers’ needs, as well as the benefits that accrue to the merchants themselves. Along the way, she said, it will deepen inclusion in Europe, the Middle East and Africa (EMEA), especially among younger consumers who don’t have access to traditional financial services products. Getting a bit more granular on the consumers’ needs, she told PYMNTS that “online shoppers are increasingly tech savvy — they want convenient and smooth payment methods that make the payment nearly invisible.” BNPL fits those needs, she added, because it delivers online credit in real time, streamlined by a short credit application process that is completed at checkout rather than after the purchase. “The customer doesn’t need to decide whether he or she has money in the account, or which cards to use,” Szczepaniak said. “They can just focus on the purchasing experience itself.” Soaring Transaction Values  No surprise, then, that BNPL transactions, currently at about $200 billion, could soar to as much as $800 billion in just half a decade. Wider availability also fosters greater financial inclusion, she said, offering access to credit to unbanked populations that previously would not have been available. BNPL is proving especially attractive to younger consumers who are used to doing pretty much everything online, many of whom don’t have credit cards. “There’s real value in having the transparency of fees,” she said, “and having the ability to monitor expenses.” Merchants themselves are seeing increased sales conversion and basket values that with credit solutions can be up to 10 times higher on average than with other payment methods, Szczepaniak said. The positive impact is recurring, as about a third of consumers are willing to offer repeat business to the merchant that offers BNPL options at the checkout. Yet despite the surging popularity of BNPL, Szczepaniak said the greenfield opportunity is significant, as the penetration is low as a percentage of transactions — a mere 3% in the U.S., for example, where regulations are relatively strict, and as much as 10% in Australia. The Security Question  Asked by PYMNTS about how BNPL might stack up against credit cards in an age where security remains top of mind, she quickly noted that the BNPL moniker extends across a broad range of products, which can, in turn, vary on a market-by-market basis. That variation also can be seen with regulations, she said, as authorities across the globe grapple with how to close any gaps between BNPL and traditional credit cards, which have been around for decades and are indeed heavily regulated. She said that developing those regulatory schemes may prove a challenge but will be necessary to safeguard stakeholders’ interests. Looking Ahead None of this is to say that the traditional financial services players — including banks — are letting the BNPL opportunity pass them by, even if they’ve been a bit late to the game. There’s ample room for banks to compete with the FinTechs that have dominated BNPL and, in doing so, to capture some revenue share, Szczepaniak said. Banks will also seize some opportunities in the consolidation that looms for the BNPL sector, she added (funding costs are high and some players are facing macro-related pressures). Providers like PayU, she said, can work with the traditional financial institutions and FinTechs alike to create BNPL ecosystems across geographies. As younger consumers choose to begin their financial journeys with FinTechs generally and BNPL in particular, she said that it’s important to make sure that these offerings build a credit history that can be shared with traditional lenders. “Collaboration between banks and FinTech players is quite important just to avoid exclusion in the future,” she told PYMNTS. We’re headed toward an age where BNPL providers will have to prove nimble in tackling the challenges and opportunities of digitization. “The BNPL space is just at its beginning,” she told PYMNTS.