Episode Six is transforming the buy now, pay later (BNPL) landscape, by putting control in the hands of card issuers versus the acquirer or other third parties. For the first time, issuers can implement changes at the account level in real-time.
To understand why this is so powerful, let’s look at the growing interest in BNPL across the industry and a breakdown of how it works.
Popularity in BNPL has soared
BNPL– love it or loath it – it is taking the nation by storm. Popularity has soared during the pandemic, with transactions in the UK having tripled in 2020. According to WorldPay, BNPL is on course to account for 10% of all ecommerce activity by 2024. Like other forms of credit before it, Paying on the Never-Never, or Hire Purchase, opinions of it vary because of late fees and additional charges. Today the BNPL providers are not regulated by the FCA, although plans are afoot to change that.
It’s not just Millennials who are embracing this new method of paying – 42% of Millennials have used BNPL in the last 5 years, according to consultancy company Kearney. This group is closely followed in percentage terms by Generation X, with 34% using BNPL in the last 5 years. *Study by consultancy company Kearney
With the rise of BNPL providers, traditional banks and issuers can be bypassed and miss out on the commercial benefits of this new payment method. Indeed, BNPL is the latest payment alternative being offered, and no online payment is complete without PayPal, Klarna or Clearpay offering to split the payment into a few instalments. In fact, millions in the UK are now using BNPL when shopping online and in-store.
The BNPL providers work directly with the retailers to offer consumers a quick and cheap way of accessing credit. In this example, instead of paying at the till or online checkout, the BNPL provider pays the merchant, and the consumer pays the BNPL provider over a period of agreed time. The BNPL provider takes a cut of the transaction amount from the merchant. If the consumer is savvy, then this is an extremely convenient way of spreading a payment over several months without incurring any fees or interest.
Giving control to card issuers
We are changing the dynamic for card issuers and banks, providing them with much needed solution sets as they seek to offer BNPL to their customers.
With the Episode Six ‘issuer configurable BNPL’ product, an Issuing bank can offer its customers the option of splitting the payment into instalments. Rules are configured to define the number of instalments, the time between each one, and of course the fees that are associated with the repayment plan. A bank customer can use a payment app or debit card.
The out-of-the box APIs enable our Issuer and Banking clients to focus on launching and monetising their products rather than spending valuable time and money building out BNPL technology themselves.
An easy win for banks
Whilst the concept of offering short-term credit is not new, it has certainly been re-invigorated and is now thriving because it is offering consumers accessible, simple, and free or very cost-effective credit. Just as banks saw competition from challenger banks and neo-banks, now they can fend off the BNPL provider competition with a service that connects directly with the consumer at the point of spend. Given that banks are already regulated, this provides customers with a more regulated offering out of the bag, that affords them all the protection of Section 75 or chargeback.