What are the 5 steps to building a successful BNPL solution?

By Puja Sharma

Consumer demand for convenience and affordability is one of three factors driving this growth, the report cited, with recent data from Deloitte showing that more than half of consumers (56%) cite the ability to test a product before making a payment as a key driver for using BNPL.

The report explores the implications of the BNPL market for banks and retailers. Deloitte and cloud banking platform Mambu has identified the five steps merchants and FinTech need to embrace in building a successful Buy Now Pay Later (BNPL) offering. This is part of a  report exploring the implications of the fast-growing sector for banks and retailers.

The report comes amid booming demand for BNPL services, with the market projected to be worth $3.98t by 2030 – growing at a CAGR of 45.7%.

Kunal Galav, Regional Director, EMEA Advisory at Mambu, said: “Our report with Deloitte defines what BNPL success looks like and the practical steps financial and non-financial brands need to take to capitalise on the market opportunity. With FinTech already directing billions of revenue away from banks via BNPL services in recent years, incumbent players risk losing out if they fail to act now. BNPL will continue to erode unsecured retail lending post-pandemic, so financial institutions must think strategically about if and how they decide to play a role in this new business line – we hope this guide will enable them to do just that.”

Consumer demand for convenience and affordability is one of three factors driving this growth according to the report, with recent data from Deloitte showing that more than half of consumers (56%) cite the ability to test a product before making a payment as a key driver for using BNPL.

Other growth factors include widespread merchant adoption, as vendors look to reap BNPL benefits, such as increased sales conversions and average order sizes, as well as accelerated market traction during the pandemic. According to Worldpay data, BNPL accounted for 2.9% of global e-commerce in 2020 and is expected to reach 5.3% by 2025.

João Caldeira, Partner at Deloitte, added: “BNPL is now a key sales and conversion driver for retailers and eCommerce providers. Merchants, if they have not done so already, are looking around for an embedded finance solution that can help them design BNPL experiences at speed and at a low cost. The bottom line is that it’s a new revenue driver and having the ability to quickly add seamless instalment-based payments at the point of the decision can change a business.”

The ‘Deloitte and Mambu Guide to BNPL’ identifies five core building blocks for businesses looking to develop a BNPL solution in an increasingly competitive environment:

• Value proposition – defining and understanding what merchants and customers need and developing a model to solve their key pain points.
• Technology and data – developing a tech stack with best-of-breed partners to enable real-time decisions as well as the creation of next-generation solutions that deliver distinctive customer experiences.
• Risk and compliance – designing a risk framework that provides a competitive edge, from in-built fraud detection and management to defining the risk appetite, model, and strategy.
• Skills and capabilities – investing in specialised talent in critical areas to complement. businesses’ existing teams as well as build their brand and differentiate their product in the market
• Go-to-market – bundling the offering within a businesses’ portfolio and bringing the minimum viable product to life.