Buy now, pay later (BNPL) is a popular payment option that allows consumers to purchase goods and services online or in-store and pay in installments over time. BNPL providers such as Affirm, Klarna, and Afterpay have seen explosive growth in recent years, especially among younger and digital-savvy shoppers who value convenience, flexibility, and affordability.
However, BNPL is not only beneficial for consumers and merchants, but also for credit card issuers who want to stay relevant and competitive in the changing payments landscape. Here are some reasons why credit card issuers should offer BNPL as part of their product portfolio.
BNPL Can Increase Customer Acquisition and Retention
One of the main advantages of BNPL is that it can attract new customers who are looking for alternative ways to finance their purchases, especially those who are underserved by traditional credit products or who prefer not to use credit cards. According to a report by The Financial Brand, BNPL users are more likely to be younger, female, and have lower incomes than credit card users.
By offering BNPL, credit card issuers can tap into this large and growing segment of consumers who are otherwise hard to reach and serve. BNPL can also help credit card issuers retain existing customers who may switch to BNPL providers for certain purchases, such as online shopping, travel, or healthcare. By providing a seamless and integrated BNPL experience within their own platforms, credit card issuers can increase customer loyalty and engagement.
BNPL Can Enhance Customer Experience and Satisfaction
Another benefit of BNPL is that it can improve customer experience and satisfaction by providing more choice, convenience, and transparency in the payment process. BNPL allows customers to choose the payment plan that suits their budget and preferences, without having to worry about interest rates, fees, or credit checks. BNPL also enables customers to complete their purchases faster and easier, without having to enter their card details or go through lengthy verification steps.
By offering BNPL, credit card issuers can enhance their value proposition and differentiate themselves from other competitors. BNPL can also help credit card issuers build trust and rapport with their customers, by showing that they understand their needs and wants, and that they are willing to offer flexible and tailored solutions.
BNPL Can Generate Revenue and Profit Opportunities
A third advantage of BNPL is that it can create revenue and profit opportunities for credit card issuers, both directly and indirectly. Directly, BNPL can generate income from fees charged to merchants or customers, depending on the business model and pricing strategy. Indirectly, BNPL can drive more spending and transactions, which can increase interchange and cardholder fees, as well as cross-selling and upselling potential.
By offering BNPL, credit card issuers can diversify their revenue streams and reduce their reliance on interest income, which has been declining due to low interest rates and high delinquency rates. BNPL can also help credit card issuers reduce their risk exposure and credit losses, by shifting some of the default risk to the BNPL providers or by using alternative data and algorithms to assess customer creditworthiness.
BNPL is a disruptive and innovative payment option that has gained popularity and acceptance among consumers and merchants. Credit card issuers should not ignore or dismiss BNPL as a threat, but rather embrace it as an opportunity to grow their business and enhance their customer relationships. By offering BNPL, credit card issuers can increase their customer acquisition and retention, improve their customer experience and satisfaction, and generate more revenue and profit opportunities.
