“In today’s turbulent economy, consumers and merchants can count on banks for stable, responsible and affordable point-of-sale financing.”
Before diving in, let’s first confront the elephant in the room. With all the latest market and regulatory upheavals, is the BNPL even sustainable?
Buy Now, Pay Later is here to stay as a mainstream payment method – the industry isn’t dying, it’s just evolving towards bank-focused BNPL solutions. The fact that Apple recently launches its own BNPL offer, Apple Pay Later. This decision is an important vote of confidence in the future of Buy Now, Pay Later.
Another key indicator is that consumer demand is strong, with 53% of consumers plan to use BNPL’s services within the next 12 months. The industry should achieve $1 trillion in annual transaction value by 2025.
So while the macro and regulatory climate is certainly affecting fintechs themselves and their ability to deliver competitive BNPL solutions, that doesn’t mean a decline in consumer demand for BNPL. On the contrary, increases in interest rates and inflation drive consumer demand for payment options over time.
Market sustainability has little to do with the service itself – it has to do with who provides that service and whether or not they can support a healthy business model for it.
Over the past three years, Jifiti has been betting on banks leading the way for BNPL and this is now the direction the industry is heading. What advantages do banks have over incumbent fintech operators?
Unlike fintechs, banks are not dependent on outside investment for their lending funds, so they are more likely to weather the economic storm. While fintechs are likely to reduce their approval rates and increase their BNPL merchant fees, banks and their offerings will remain largely unchanged. This is because banks have well-established balance sheets and can leverage their low cost of capital to offer competitive point-of-sale financing. Banks do not solely depend on BNPL for their existence.
Another factor in favor of the banks is the fact that they already operate within a regulated framework, so they will not be constrained by upcoming BNPL regulations. Regulatory pressure is good news for banks because it means a shift in demand for responsible financial options from regulated financial entities.
With a white-label BNPL solution in hand, banks can play to their inherent strengths and brand image and leverage consumer trust in their services to become BNPL market leaders.
With so many players in the BNPL landscape, what differentiates Jifiti from other market players?
One of Jifiti’s key differentiators is that we enable banks to compete in the BNPL space using our white label platform. Merchants can easily integrate the consumer loan programs offered by these regulated financial entities directly into their point of sale or online payment. This allows them to provide the best service and user experience to their customers.
In your experience, what are the two most essential features that merchants need, but aren’t necessarily aware of, in an BNPL solution?
Many merchants do not know that with the following two features, they can strengthen their brand image and retain their customers, in addition to maximizing their conversion rates.
When the BNPL solution is white-labeled, branded for the merchant and integrated directly into their customer journey, it functions as a booster for the merchant’s brand. Direct-to-consumer fintechs tend to distract and distract the consumer from the merchant’s own user experience, but a white label solution allows the merchant to build customer loyalty.
Another essential feature is multi-lender with cascading. With a multi-lender solution, if a customer’s BNPL application is not accepted by the primary lender (bank or Tier 1 lender), it “cascades” to a cascade of secondary lenders. Merchants can increase their BNPL acceptance rates by up to 85% this way.
Higher acceptance rates can not only translate to increased sales, but also to enhanced brand equity. When customers are approved for point-of-sale financing, they have a positive retail experience. If the solution is both multi-lender and white label, they will associate this positive experience with the merchant’s brand.
What do you predict the future holds for the BNPL industry and Jifiti?
I predict the pendulum will swing back to banks and traditional lenders (this is already starting to happen). I think tech companies will stick to the tech aspect of BNPL, while banks will focus on lending, the space where they really shine.
For merchants and consumers, this means easier and more convenient access to consumer finance programs from banks. Banks will need to transform their consumer loans and make them available when and where consumers need them – at the point of sale.
BNPL has become a staple instead of an asset, as consumers expect it as a means of payment at checkout. Banks and lenders that want to be relevant and competitive in the BNPL space can do so quickly and effortlessly by partnering with the right technology company. As a facilitator of white label point of sale financing solutions, Jifiti is positioning itself to be at the center of the evolution of the BNPL space.
BNPL offers banks the opportunity to be part of the “payment page experience”. This can open the doors to a more direct relationship with buyers, even if they are not bank customers, which has never been possible before.
This interview was first published in Payment Methods Report 2022the most up-to-date overview of trends and developments in payment methods and the innovative technologies on which these methods operate, new consumer habits and strategies to gain conversion and retention.
About Yaakov Martin
yaakov martin is the CEO and co-founder of Jifiti, a global fintech company which he co-founded in 2011. Yaacov is a subject matter expert on BNPL and a contributor to leading financial, fintech and retail publications, including The Paypers, American Banker, Business Insider, TechCrunch, Forbes and many more.
About Jifiti
jifiti is a leading global financial technology company providing white label Buy Now, Pay Later solutions for banks, lenders and merchants. Jifiti provides state-of-the-art technology and innovative solutions to regulated financial entities and merchants to compete in the growing BNPL market.
