With a rising number of shoppers opting for a Buy Now, Pay Later (BNPL) payment option, there has been a steady increase in the number of BNPL providers. The growing popularity of BNPL among end consumers has mandated the underlying lending platform to be feature-rich, but also deliver on the core need of security, scalability and resiliency. Selecting the right technology platform is essential for avoiding many of the issues pertaining to operational flexibility, integration with cloud native technologies and seamless underwriting experience.
Let’s look at some of the essential elements that will serve as the perfect foundation for a future-ready BNPL solution.
- API-driven architecture with pre-built integrations: BNPL necessitates the provider to integrate into both sides of the transaction chain i.e. payment and lending ecosystems, as well as various merchant partners and internal systems. Thus, support for API integrations across the entire customer journey including lead generation, loan origination, disbursal, repayments and servicing in addition to internal administrative functions, are essential to enable seamless interactions. Solutions providing pre-integrated APIs, or an API-marketplace can help slash the integration time down from days to minutes.
- Real-time onboarding: Customers and retailers both expect instant gratification. Whether onboarding new merchants or signing up customers at the PoS, BNPL providers need to create a seamless experience that supports each transaction – KYC, approvals, AML, compliance and fraud checks etc. – in real-time. A blend of third-party integrations, AI/ML and rule-based decisioning can help organizations to maximize straight-through processing rates necessary to reach the operational efficiency required to manage these high-volume loans.
- Workflow & partner portals: The lending platform must seamlessly orchestrate automation and operations throughout the workflow, including the backend, system administration, merchant site, and product management. Availability of a merchant portal to manage campaign and offers, business dashboards covering overall turnover, success/failure rates, recon and service data etc. can be of great use.
- Rule-based decision engines: The scale and variety of BNPL offerings require policy checks for eligibility, intricate limit management setup (e.g. differing merchant-level limits) and automated servicing (e.g. fee refund for profitable customers). This mandates BNPL platforms to provide advanced rule-based decisioning capability. Support for UI-based configurable, modular and re-usable rule sets can ease the management overhead for business and policy users.
- Cloud-native architecture: BNPL is characterised by a smaller ticket size and higher volumes. A cloud-based solution can not only help organizations minimize heavy capex costs but also manage the surge in volumes typically witnessed during festive seasons and promotional sale campaigns. A cloud native architecture also provides added benefits of faster go-live and higher security.
- Low code: With the same objective of speed, the platform should allow internal teams to create and iterate the BNPL lending system without the need for advanced coding skills. BNPL providers should be empowered to create new products within days, instead of weeks or months, and quickly respond to changing market scenarios and customer needs.
- Cockpit view: Clear visibility and real-time data is critical for BNPL providers to enable smooth operations and excellent customer service. A digital cockpit combining customer-level, portfolio-level, partner-level dashboards enable providers to get a clear view of market status and opportunities. They can apply information to make data-driven decisions and forge an ongoing improvement loop.
- Integrated fraud management: BNPL gateways are the new favourites of fraudsters who have been quick to exploit user-friendly onboarding and purchase experiences. To check the possibility of fraud earlier and prevent losses being passed down the credit lifecycle, the BNPL lending platform must have integrated fraud management processes like anti-money laundering, transaction analysis, digital footprint tracking, and instantaneous credit history verifications. On the other hand, the software must enable integration of new checks based on evolving regulatory guidelines and procedures.
- Integration to data ecosystem: Accurate decision-making based on real-time data is vital to the success of a BNPL lending system, especially as the market is still evolving and involves high risk. Basic analysis and checks may not suffice, resulting in errors and glitches. The right data ecosystem across the customer lifecycle will ensure a frictionless experience for the BNPL customer, connect multiple data sources into the decision-making workflow, ensure accurate decisioning processes, and reduce BNPL credit risk by presenting analytical data on credit history, behavioural scores etc. In an uninterrupted flow of information, BNPL lenders can identify risks and iterate faster.
- Support for rich features: BNPL providers need to offer unique services and feature to distinguish themselves from competition. This necessitates the underlying tech platform to be agile and robust enough to support multiple new-age features on the lines of conversational engines, ingestion and processing of unstructured data, chatbot based support, cashbacks, etc. The customer-side digital infrastructure covering repayment methodology and process, loan statement view, statement generation etc. are also important areas that should be supported.
- Extendibility: BNPL platform must be able to cater to large number of merchants. In addition to being highly available and scalable to cater to existing merchants, the technology platform must also allow lenders to easily extend the same to new merchants, products and configurations with ease.
The pandemic has intensified and hastened the shift towards non-traditional, digital payments systems. BNPL, a relatively new form of embedded payments and lending, is disrupting everything including credit cards, loans, overdrafts, and PoS payment providers.
To support these changing paradigms, FinTechs are using emerging technologies to build platforms that have a positive impact on a BNPL lender’s offerings, allowing them to create a better experience for their customers. Any BNPL offering must be designed for speed, agility, and sustainability. The right technology platform can ensure that the BNPL platform is not only robust and built for the long-haul but is also scalable and agile enough to capture the evolving BNPL market.