Why incorporating BNPL into the overall cardholder experience will improve profitability

For years, the BNPL (Buy Now Pay Later) payment method has increased in popularity. Although BNPL providers primarily take the lead, banks and card issuers can just as easily gain traction in the growing trend – if partnering with a card-based BNPL software supplier. Take a closer look at why adding card-based BNPL to the credit product lineup can generate a new profitable revenue stream.


Reach a broader consumer segment with card-based B2C BNPL

What is card-based BNPL anyway, and why are consumers craving it? Card-based BNPL is essentially a flexible short-term loan connected to credit or debit cards. It allows consumers to purchase items with their card and pay for them later. Completed card transactions can thus be converted to instalment plans with a simple click in the consumer’s bank app, allowing them to split a single purchase into several payments spread over a set number of months.

The quick and seamless payment method favours consumers wanting to purchase more expensive items or gain more control over their personal finances by spreading their costs to their convenience. This has become especially beneficial in times of high inflation.

Other favourable perks with the BNPL payment method are quick approval processes and access to interest-free rates – if payments are repaid back on time. Consumers leveraging the payment method are mostly aged 25-34, but older generations are increasingly catching on the trend, resulting in doubled use of BNPL in the last 12 months for those aged 55+.

By offering BNPL for both credit and debit cardholders, banks have the possibility to stay relevant within consumer lending and retain their existing customers, but also attract new customer segments preferring the flexible payment scheme over traditional payment methods. Besides, when given a choice, 70% of consumers would be interested in bank-issued BNPL, giving banks a hefty advantage compared to regular BNPL providers.


Leverage the spiked interest for BNPL in the B2B segment

It’s not just consumers taking advantage of the seamless payment method; BNPL for businesses is also increasingly gaining traction. Much like Buy Now Pay Later for consumers, B2B BNPL allows business buyers to defer payments at point-of-sale or spread their costs when converting payments to instalment plans (post-purchase).

The market size for B2B payments signifies one of the largest in the world, expected to surpass $111 trillion in transaction value globally by 2027, meaning a growth of 26% from 2022. Embedded in the substantial growth is the spiked interest in the BNPL B2B model. Third-party risk-management tools, such as credit checks and KYC/ID/AML validation that optimise the credit approval process and improve cash-flow flexibility are one of the reasons behind the forecasted growth. Ultimately, this means a massive opportunity for banks that can offer corporate financing using the BNPL model while ensuring ethical lending and mitigation of risk.

When implementing Sileon’s BNPL SaaS technology into its financial system, a bank can offer both B2B and B2C BNPL on existing cards in a matter of 6-8 weeks. While banks tap into new revenue streams, the benefits for both buyers and sellers are of great value as well. Among other things, buyer benefits include the convenience of converting payments into instalment plans. For sellers, improved cash flow and conversion rates that boost the expansion of operations are other beneficial factors pushing for future growth.


Configure unlimited BNPL products and increase annual growth – without the hassle

As BNPL comes in many forms, such as payment per invoice, deferred payments or payments made in a set number of instalments (e.g., three or four instalments split over a set number of months), a bank must be able to adjust an offering to meet the desired market or customer segment. Facing technical difficulties in infrastructure and legacy, banks are often hindered by core banking complexity and the lack of internal IT resources.

On the other hand, by using a BNPL software supplier like Sileon, you can configure different BNPL products for different needs. BNPL products can, for example, be based on different customer segments, campaigns, brands, and markets. Besides, given the swift integrational process, there’s no need to change the infrastructure. BNPL products can easily be created within a few minutes, whether for physical or virtual cards or digital wallets.

Skipping groundwork and thus going fast to market is critical, but what’s even more interesting is the improved cash flow banks gain by adding BNPL to their credit product lineup. The number of credit, debit and prepaid cards in circulation accumulated to nearly 26 billion in 2022, and is expected to reach 28 billion by 2027. Suppose you’re an established bank with 20 million credit cards, resulting in 1 billion yearly transactions (considering an average credit card is used 50 times per year). Based on international industry standards, the estimated annual number of BNPL plans would thus accumulate to 35 million, resulting in €875 million in BNPL revenue annually.

Integrating BNPL into the overall cardholder experience, whether for B2C or B2B, ultimately allows banks to increase revenue dramatically. That is if they decide to partner with a BNPL software supplier.

Want to crunch the numbers yourself and estimate your annual BNPL revenue? Take a look at Sileon’s BNPL Roi Calculator and enter the number of credit or debit cards in circulation for your business. Numbers speak for themselves.

The information in this article is for informational purposes and general distribution only. Sileon assumes no responsibility or liability for any errors or omissions in the content of the article. The content in this article may change without notice.