Buy Now Pay Later (BNPL) lending has emerged as one of the most successful fintech trends in the past two years; its adoption has been off the charts. BNPL purchases have grown over 300% since last year, with $100billion in BNPL retail purchases expected by the end of 2021, up from $24billion in 2020 . While the pandemic has provided the perfect conditions for BNPL’s immense popularity – a huge uptick in eCommerce and decrease in disposable income – the soft loans would not have caught fire in the same way had it not been for its API-based (Application Programming Interface) infrastructure. BNPL products have thrived largely due to the APIs at their literal core.
Anabel Perez is the CEO and Co-Founder of NovoPayment. With over 14 years of experience in the payments field, she speaks to The Fintech Times to explain how APIs are enabling the BNPL craze to continue, by enabling personalisation to better a customer’s experience:
Nimble Infrastructure Encourages Widespread Merchant Adoption
One of the many benefits of an API model that has been critical to BNPL’s growth is its low lift to implement. From their swift integration to their versatility and ability to scale and evolve, nimble API infrastructure has made BNPL simple and cost-effective for merchants everywhere to adopt.
Like the launch of any product, time to market can influence user adoption and, ultimately, the product’s success. APIs are built to be nimble and modular, allowing developers to add layers to existing infrastructure quickly and seamlessly. BNPL products operate the same way, offering speedy integration and onboarding times for partners with compatible eCommerce platforms. On average, it takes businesses only minutes to integrate a BNPL solution into their checkout experience, inviting merchants to tap into the trend with no significant internal lift and does not require a dedicated team of developers to do so.
The versatile nature of APIs has also enabled a variety of players to offer BNPL. Because BNPL provider APIs are cloud-based and designed to mix-and-match, it supports adoption virtually or physically. This allows both brick-and-mortar and eCommerce shops alike to offer BNPL products, widely expanding market reach. As those merchants scale, the APIs scale and iterate with them. As new use cases become available, retailers can incorporate those that complement their business models. BNPL can be specified within various parameters —an enticing value made possible by APIs.
APIs Champion Shining User Experience
Branding and customer experience (CX) are essential elements of a successful product – BNPL players have enhanced the CX by personalising the solution for each user via APIs. Merchants that offer BNPL options at checkout have seen sales rise by 20-30%. Although BNPL’s micro-lending model contributes to this impressive figure, conversions are also bolstered by custom, omnichannel offerings and highly tailored shopping apps.
Headless commerce – separating the front end and back end of eCommerce apps using API infrastructure – is becoming more popular, as it allows a business’s brand to remain at the forefront and reduces disruption to the platform interface during backend updates. These major advantages are wins for users, who can enjoy a continuous brand experience across devices without service interruptions.
Continuous brand experiences and omnichannel touchpoints have become a sticking point for customers. 90% of consumers expect a seamless, omnichannel experience across devices and 73% shop across multiple channels. BNPL APIs fulfills those expectations, enabling the desired experience for shoppers online or in-store.
APIs also deliver personalisation to BNPL users, something 80% of customers say they want in a shopping experience. As BNPL solutions are, of course, loans, they inherently consider personal financial information, and they use open banking APIs to do this. When the BNPL provider performs a soft credit pull, authenticates a credit or debit card, or checks any other financial data, it requires open banking APIs. An app’s spending limit is unique to each user based on this information – in other words, it is hyper-personalised.
Some BNPL providers have taken personalisation to the next level, offering super apps that combine multiple services and products in one place. BNPL users can now take advantage of curated deals from their favourite brands and complete their customer journey – including BNPL, shipping, returns, and rewards – all in one place. APIs ensure that suggested deals are relevant to the user, payment information is saved for fast checkout, and the experience is precisely to the user’s preferences.
BNPL of the Future
The BNPL craze has been driven by fintechs until now, but the staying power of this massive trend can be gleaned from the large payfacs and other heavy hitters in financial services, who are scrambling to go to market with their own BNPL offerings. Mastercard and Visa have announced they are developing proprietary BNPL programs for their clients and partners, while Square is set to acquire BNPL platform Afterpay. The simple integration and customisability of BNPL API-based platforms have driven their adoption and resulting prosperity thus far and are now catalysing innovation among incumbent players.
Fintech is about reinventing financial service products to make them more accessible and more relevant to a wider market. The pandemic threw our world into turmoil, but API-based BNPL solutions have provided a new perspective on the formerly unsexy loan, and more importantly, helped people in need take control of their personal finances during an extremely difficult time. Ultimately, isn’t that why we innovate?