How Banks Can Enter the Booming BNPL Space With Card-Based BNPL
Sileon is a Business Reporter client.
Buy-now-pay-later (BNPL) is the latest trend in the digitalization of online and retail payments, providing instant lines of credit to consumers at the point of sale, and opportunities for retailers and specialized payment firms. It is already the fastest-growing payment method in North America and Europe, and the market is predicted to account for $566 billion of transactions by 2026, up from $309 billion today.
This payment method is particularly popular among younger generations of customers, who have been brought up using apps, often as an alternative to cards that were not designed for e-commerce. Research by Gartner suggests card usage will decline by 50% by 2030, as today’s younger consumers become a greater proportion of the adult population.
For traditional banks, however, the rise of BNPL poses a serious challenge to their card services businesses, and to retaining existing customers and attracting new ones. Market share has already been lost to BNPL providers, and there’s a real risk that younger customers might abandon card providers for other digital products as well once they start to move away. “Banks that want to stay relevant for their younger generations of consumers need to up their game, and follow on the digitalization trend,” warns David Larsson, CEO of SaaS tech company Sileon.
The answer, says Larsson, is for traditional banks to add BNPL to their existing card base, providing those customers with the benefits of being able to access credit and spread the cost of payments when they need it most.
One option is for banks to devote significant time and budget to this process through internal resources—but this is not a route Larsson advises they go down. “It can get quite complex rather fast,” he says. “We would really recommend partnering with a BNPL tech company.”
Banks using Sileon’s BNPL SaaS platform can get up and running in a single integration, without the need to change existing systems or infrastructure. The platform itself is white-labeled, so customers only see the branding of their bank, and it works across any market, currency and transaction.
The entire process could take as little as three months—significantly shorter than building this functionality from scratch using in-house teams. “Customers first try out and learn the functionality in our sandbox environment,” Larsson explains. “They then move on to a single implementation of Sileon’s two powerful APIs. All this is overseen and supported by technical staff.”
Banks generally want to start off small, he says, and then scale up once they are more familiar with the concept and platform. “A retail bank could begin by adding BNPL functionality to their existing credit card base within days, and later expand BNPL functionality to their debit card base,” he suggests. “After that, it’s possible to also add BNPL to a checkout or digital invoice.”
Banks that act now are still able to benefit from BNPL, believes Larsson, as they draw on their strong brands and reputation for financial prudence, as well as their significant customer numbers. “It can allow them to regain lost market share for cards and meet the younger generation’s expectations for flexible and seamless payment solutions,” he says. “They can turn this from a risk into an opportunity.”
To find out more about how Sileon can help your bank launch card-based BNPL quickly, visit sileon.com.
Image: iStock id1357135084
