Digital banking
ast October, when Standard Chartered and Atome Financial announced a ten-year multi-product strategic partnership to deliver a wide range of financial services to consumers and merchants across key Asian markets, it was widely viewed as a logical move. This, after all, was typical of a traditional bank looking to generate new revenue streams – and also retain existing customers.
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“Consumers have become accustomed to being offered a selection of payment options when shopping both online and in-store,” says Antony Stephen, official spokesperson for BNPL at Barclays, as well as CEO of Barclays POS finance business. That is especially true, Stephen emphasises, when it comes to “new payment methods that enable them to manage their finances more flexibly”. Little wonder, then, that banks like Standard Chartered are rushing towards introducing so-called ‘buy now, pay later’ (BNPL) schemes – allowing customers to spread the cost of purchases without incurring any fees or interest. Nor is the Asian giant alone. The global BNPL space – a market accounting for an estimated 2.1% of global e-commerce transactions in 2020 – is forecast to double to 4.2% by 2024.
Barclays Partner Finance, for its part, has been providing regulated point-of-sale lending products and services for many years, offering interest-free and interest-bearing loans over a range of lending periods. Last December, for instance, it extended its partnership with Amazon, enabling customers to pay in instalments on purchases of £100 via the Barclays app.
It pays to be flexible
This new flexible payment method – known as Instalments by Barclays – is a fully-regulated lending option whereby the bank carries out credit and affordability checks to ensure consumers are only borrowing what they can afford to repay. If flexibility is the major takeaway here, it certainly has not been lost on BBVA either, where Eduardo Flores, global program manager for BNPL, says the bank currently has “three large blocks of solutions” in development. “In the first place [there are our] own developments, such as the one we’ve promoted with the AliExpress partnership in Spain, so that buyers can defer payments for purchases on this platform,” Flores explains. “Secondly, there are solutions done in collaboration with third parties. Thirdly, there are those initiatives based on the bank’s own payment tools, with the aim of improving the shopping experience for BBVA customers, with more flexibility, control and transparency.”
In the broader BNPL space, meanwhile, Klarna continues to loom large. Based in Stockholm, the Swedish giant has moved into ten new markets since the start of 2020 alone. This growing international presence is unsurprisingly making more traditional
Future Banking /
www.nsbanking.com
Where paying bills is a ‘future me’ problem
Share of respondents using ‘buy now, pay later’ in the following ways (%)*
UK US China Germany 46 37 28 23 15 16 9
*Multiple answers possible Paid whole
amount installments Paid in
Could imagine using it
Will not use it 30 30 31 21 22 21 23 28 39
Antony Stephen, CEO of Barclays POS finance business.
providers, including major banks, sit up and take notice – especially given the US is currently Klarna’s fastest-growing key market by volume. Part of Klarna’s success has been attributable to customers being ‘less sticky’ than has been the case historically. This relative lack of consumer loyalty means they are more likely to accept a one-off ‘deal’ before moving on to another provider.
Noteworthy too is the fact that the BNPL business model does not rely on monetising the consumer. Instead, BNPL providers generate most of their revenues by charging merchants a fee for helping secure the sale. Moreover, merchant loyalty can be bought – despite BNPL fees typically being higher than those when accepting payments via credit or debit cards – simply because many merchants find these fees are more than offset by the benefits of offering BNPL as a payment option.
Eduardo Flores, global programme manager for BNPL at BBVA.
Juan José Solis, global head of consumer finance, open innovation and new business models at BBVA.
“[There are our] own developments, such as the one we’ve promoted with the AliExpress partnership in Spain, so that buyers can defer payments for purchases on this platform.”
Eduardo Flores Brand trust
On the face of it, then, operators like Klarna pose a major threat for traditional banks looking to both attract and retain customers. BBVA’s Juan José Solís, however, is sanguine. “The loss of stickiness with banks isn’t new, there have always been clients who operate with various entities,” explains Solís, global head consumer finance, open innovation and new business models at the Spanish bank. “But the mainstream banks still keep the strength of trust and the strength of the brand.”
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Barclays; BBVA
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