BNPL: what lies ahead?

Digital lending, and specifically Buy Now Pay Later (“BNPL”) brought to the mainstream with players like Affirm and Klarna, has transformed consumer behavior. Digital lending provides better access, quicker funding, and expanded use cases, reshaping our culture and economy.

While the evolution of the digital lending model has strengthened possibilities for individuals both domestically and globally, there are a few ongoing shifts worth noting as we enter a new year.

An Era of Consolidation and Integration

BNPL may be entering a phase of consolidation and restructuring. Industry titans, previously mentioned, have generated credibility and enviable market positions – but traditional FIs and tech giants are fighting back for more market share.

Several banks have already launched BNPL products in the last couple of years, including Chase’s “pay in 4” and “pay over time”. More important to note is banks’ growing unwillingness to process BNPL loans originated by third party providers. Banks like Chase are instead opting to instill rules and incentives to push customers towards their own financial products. This trend is likely to continue.

Perhaps we can expect fewer, but stronger standalone BNPL providers, updated merchant fee structures, and an overall rehaul of available lending products, providing consumers with more integrated options within their chosen banking institutions.

More tech and Innovation

Regardless of the builders and companies behind up-and-coming financing options, some features are more likely to appear than ever before – all centered around consumer benefits and protection.

• Built-in and accessible financial education resources, available 24/7, from point of sale to successful repayment
• Budgeting planning tools to support comprehensive consumer finance goals
• Loyalty programs (offered directly with standalone BNPL providers)
• Customized offers, tailored to things the customer wants or needs

Increased Use Cases and Market Expansion

Data sets exhibit the benefits of BNPL – better conversion rates for businesses, more access for consumers. But what needs can BNPL solve in the future?

Instant lending products are accelerating in the following domains and will continue to thrive:

• Healthcare, including necessary and voluntary medical procedures
• B2B use cases such as supplier payments and procurement funding
• Education and professional development, supporting both online and in person opportunities
• Home improvement and sub-categories of the housing sector

Regulatory Scrutiny

Regulators continue to raise concerns over data privacy, security, reporting transparency, and rising consumer debt. There are few organizations like Cross River that have transformed regulatory oversight into tactical, technology driven solutions.

While some players will struggle to meet demands, Cross River and its clients remain well positioned to address potential mandated best practices:

• Future proofing growth with rigorous compliance standards - Enhanced tech features that continue to flag for compliance and credit eligibility as well as fair lending
• Effective KYC/KYB capabilities
• More data to arm customers with the benefits of the product and financing options

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Success in this fast growing space will be dependent on placing consumer and customer needs on the same pedestal as risk management and regulatory governance. Through systematic enhancements in technology, the BNPL sector will likely emerge as a fully integrated part of the global financial system, fulfilling its’ prime objective: to offer flexible payment options for borrowers, when they need it, where they need it, anytime.