How to support (and keep) your cardholders through financial difficulties

In today’s rapidly changing financial landscape, banks are not just institutions that hold your money; they are partners in your financial journey. With the elevated interest rates and the unlikely scenario of returning to pre-pandemic price levels anytime soon, banks need to step in with innovative solutions for cardholders that ease the burden and promote financial stability. If not, they risk losing market shares to rising third-party fintechs eager to swoop in and satisfy customer’s needs. Here are our key takeaways on how you can support (and keep) your cardholders through financial difficulties.

Digitalize the banking experience and provide solutions that boost youth’s personal finance

Banks can play a pivotal role in supporting their customers during economic times, especially Gen Z, who are grasping at thin air after coming of age in an era of lockdowns, inflation, and economic despair.

It might not come as a surprise that Gen Z, or the so-called post-millennials, accounts for price-conscious consumers who invest heavily in research and weigh their options carefully before committing to any services or goods.

What’s more, this consumer group is the one ditching traditional spending methods for digital technology solutions such as mobile wallets and peer-to-peer payment apps. It’s also the consumer group that will most likely use Buy Now Pay Later services when paying for goods.

To keep up with the highly informed digital natives, now accounting for 20% of the population, banks need to digitalize the banking experience and start to offer transparent post-purchase BNPL options. This way, they can attract younger generations striving to make well-thought-out spending choices, even in times of financial difficulties. Besides, when looking at consumer preferences, bank-issued BNPL is what 70% of consumers would select if such an option were available.

Go beyond borders – extend your bank offering with personalized BNPL options in-store and at online checkouts

BNPL options have started to appeal to larger crowds in line with surged living costs and inflation. In some instances, it has even developed into a necessity rather than simply being an additional choice of payment.

When facing the checkout counter, consumers will outweigh the different payment options and most likely choose the most beneficial and personalized offer. In most cases, this represents an offer promoting easy access to credit, favourable terms and a flexible payment plan, i.e., the driving factors of BNPL.

By embedding BNPL options on existing credit- and debit cards, banks have an opportunity to extend their offering and implement a more holistic approach, a crucial factor in order to keep up with competitors.

In turn, it will give consumers the flexibility to split their payments without the need for a separate BNPL account or complicated application processes, ultimately making large purchases more manageable.

Besides, when using a credit card for BNPL, cardholders may still earn rewards and benefits associated with their card, such as cashback or points. This innovative approach of incorporating BNPL into the overall cardholder experience thus promotes financial resilience and empowers individuals to gain a better understanding and control of their financial situation.

Customize your offerings with responsible credit management to fit different customer segments

BNPL increases financial inclusion, but it doesn’t always come without risk. In some instances, BNPL can still impose a threat to consumers’ financial health. That is, if the payment method is not handled with care and responsibility. While the majority can benefit from the flexible payment method and take advantage of managing payments at a lower cost, others need more guidance and support in the process.

With the main goal of reducing the chances of excessive debt accumulation, banks can help cardholders better understand the importance of responsible credit usage but also manage their overall spending limit. For example, with the right BNPL Platform integrated, a bank can create a variety of BNPL products adjusted to fit different customer segments, campaigns, or tiers. This means consumers will only receive offers that align with their financial goals.

A strategy for banks aiming to seize market shares and increase their chances of success in the BNPL space is thus to challenge third-party BNPL providers by emphasizing their role as responsible financers with consumers’ financial health in mind. This will allow them to differentiate themselves from other BNPL players while offering responsible credit management to cardholders.

Conclusion

In the face of economic challenges, providing innovative financial solutions for cardholders is key to ensuring their continued loyalty and satisfaction. By implementing the following strategies, banks can effectively help consumers weather financial storms while fostering and retaining long-term relationships based on trust and support.

• Digitalize the banking experience and offer solutions that enhance the personal finances of young people
• Expand their banking services by providing tailored BNPL choices in stores and during online transactions
• Implement responsible credit management strategies that cater to diverse customer segments

Besides, by integrating BNPL into credit and debit cards, banks can undoubtedly position themselves as pioneers in the financial landscape. Not only will they retain and satisfy existing customers, but they will ultimately also increase their annual growth.