Financial institutions (FIs) looking to get a piece of the action in the buy now, pay later (BNPL) space may be wise to investigate the timing.
As financial institutions struggle to unlock flexible payment options to More agile competitors are making it a value proposition for customers during the purchasing process. In contrast, financial institution services typically focus on post-purchase installment plans, where both high interest rates and inflation can be factors.
However, as Split CEO Nandan Sheth Karen Webster recently said that financial institutions looking to regain their position in the BNPL market have options, especially given interest rates and inflation.
“Consumers are worried about taking out new loans, even if it’s a short-term loan. [certain] Buy now, pay the loan later to buy what you need, with annual interest rates ranging from 25% to 35%,” Sheth said.
Sheth said a more affordable option is an installment loan offered by banks, which usually doesn't charge interest.
Post-purchase presence
Almost every major issuer in the United States has implemented post-purchase installment programs that allow consumers to deduct typically large purchases from their statements and pay them over time.
But Sheth said issuers are lacking in such options at the point of purchase, during a transaction where affordability can influence the decision to proceed with a purchase. It is said that it is to provide. With his focus on BNPL, FinTech has typically captured that part of commerce and influenced purchasing decisions in ways that financiers have not been able to (yet).
Consumers who choose to pay by card value perks and are likely to trust their banks, Sheth notes. However, he added, shortages of the items they are purchasing could inhibit what and how much consumers buy. and even if it could be done buy not at all.
To this end, Splitit late last month debuted FI-PayLater, which allows financial institutions to offer BNPL at the point of sale, narrowing the gap between traditional players and fintech companies, said Sheth. gave banks room to play at what they called “time of purchase.” ” segment, i.e. in fact This is a bigger opportunity than what you saw after your purchase.
“We intend to play a network role, or a gateway role, in FI postpaid services,” Sheth said.
By doing so, the economics of a financial institution's installment plan is actually to be improved.
With a single point of access to Splitit's integrated platform via API, any issuer can initiate installment offers to existing cardholders at checkout across Splitit's merchant network. Conversely, sellers who want to access a publisher's offers can do so through a single point of API connectivity.
“Through the orchestration layer, we removed many-to-many complexity,” says Sheth.
new network effects
In effect, Splitit acts as a postpaid network.
“We serve both parties and simplify installment payments,” he said.
Beyond simplicity, Several Other innovations are also at work, with Splitit becoming one of the first installment engines to allow issuers to brand their cards at merchant checkouts, with card “art” instantly visible . in the midst of transaction.
There are also options for issuers to onboard and specify terms such as the payment period (3 or 6 installments) and whether the merchant or consumer pays the fees associated with the installments.
The consumer experience has also been streamlined, Sheth said, adding, “It's built into the merchant checkout, so you can initiate a one-click checkout for installment payments.”
He said that behind the scenes (as already seen with post-purchase installments) Splitit will continue to pre-fund merchants.
“Publishers don't have to rely on another third party to provide this solution to sellers,” Sheth said. With Splitit, “he works with a company that is 100% focused on installment payments with cards.”
What lies beyond the horizon?
Splitit is currently testing FI-Pay Later with three banks, Sheth Said, We plan to launch the service with at least one of these banks within the next two months.
“But the technology is perfectly built,” he said. In the long term, Sheth said there is an opportunity for sellers and publishers to collaborate on marketing and jointly increase scale and reach.
Nearly half of Splitit's business is outside the U.S., so offering installment payments at checkout is also a big opportunity overseas, he said.
Regarding FI-PayLater, he had this to say:we We want to level the playing field for publishers. ”
