Banks are foraying into Buy Now, Pay Later space looking for growth

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Several banks are showing interest in entering Buy Now, Pay Later (BNPL) space as the payment method is attracting growing interest from consumers and retailers. The reason behind this move is that most consumers prefer BNPL services from their banks instead of other companies. Consumers trust banks as credit providers while choosing a short-term credit product. Banks are capitalizing on this trust and offering or expanding BNPL services to new markets. 

Various banks already operating in Buy now, pay later space are Axis bank, HDFC bank, Kotak Mahindra, Monzo, and ICICI bank. Recently, a few banks have announced that they are entering this space are:

• Digital bank Zopa has announced that it is entering into the BNPL space in Money 2020 Europe, which was held in June 2022. With the growing adoption of BNPL services in the United Kingdom, the digital bank is hoping to capitalize on the market demand. Zopa is rolling out a fully regulated product suite to ensure customer protection and transparency. The bank is offering its customers this payment option for larger purchases of around US$ 313 to US$ 37,700; otherwise, the customer may spend months or years of savings on purchasing. Since BNPL is under the regulatory spotlight in the UK, the company is offering a staged offering to start with BNPL retail finance for merchants through B2B2C partnerships. Later, it is offered to consumers once the new regulation is enacted. The company will conduct affordability tests and credit checks for its customers before offering credit and provide tools to help customers reduce their debt.
• In March 2022, NatWest, a UK high street bank, announced its plans to launch a new product, BNPL, in the summer. It makes customers convenient because they can make purchases anywhere that accepts Mastercard. NatWest bank is also offering the transactions with protections that customers expect from a fully regulated bank. 
• In June 2022, ICICI bank announced that it is partnered with ZestMoney, a digital payment or pay later platform, to expand its “Cardless EMI” facility for purchases at retail and e-commerce platforms. The Cardless EMI facility, commonly known as Buy Now, Pay Later (BNPL), is now expanding to new platforms. Post this partnership, bank customers can have the option to convert transactions up to 1 million into EMIs by simply providing their registered mobile number, PAN details, and OTP received on the registered mobile number at the time of checkout at retail outlets. The partnership also allows ICICI bank customers to use ZestMoney’s merchant base and avail of products like “pay-in-3”, where they can split the cost into three EMIs with no extra cost. ICICI bank’s pre-approved customers can avail of this BNPL facility across various categories, including electronics, travel, fashion apparel, home appliances, laptops, home décor, and sportswear. They can avail the facility for well-known brands such as OnePlus, Sugar, Mamaearth, Boat, Decathlon, Xiaomi, Urban Ladder, Titan Eye Plus, and Yatra. In addition, customers can also have the option to select repayment tenures starting from 3 months to 15 months and do not have to pay any processing fee to avail of this option. The bank and ZestMoney expect to scale up the affordability and convenience of credit solutions to a wide customer base.

With the established deep customer relationship for the decades, banks have added the advantage of customer data that can provide insights into approval rates and allow them to offer bigger loans than fintech companies. Moreover, banks have a wider presence through a chain of branches, consolidated customer financial statements and the opportunity to educate their customers about BNPL. By expanding BNPL services to larger transactions and longer terms, providing flexible repayment schedules, and higher approval rates, banks are expected to grab plenty of growth opportunities in this space. 

To know more and gain a deeper understanding of the global BNPL industry, click here.