Buy Now Pay Later

BNPL is the most popular product of the land. Consumers don’t want to purchase on their credit card that could carry a 29.99% APR. Whereas BNPL or Buy Now Pay Later players are offering 0% interest, no fees and allows the consumers to pay it over time. Sometimes the consumers can pay it over 4 months! It’s an easy choice and no wonder BNPL is becoming more and more popular.

What is BNPL?

BNPL or Buy Now Pay Later is probably the biggest threat to credit card companies. These products are everywhere and it’s becoming an integral part of an online shopping check out experience.

BNPL as it sounds is a reverse layaway program. Consumers can make a purchase of a product or a service and pay over time. Sometimes these payment arrangements can span over multiple months.

The benefits of using BNPL

The advantage of using a BNPL as a credit option is that the alternative such as credit card can charge up to 29.99% compounding interest. That means a person buying a product or service on a credit card and the consumer doesn’t pay off the balance every month, he or she can be paying a ton of interest payments and might not be able to get out of their obligations in a long time. BNPL however charges no interest or fees, the consumer basically gets an interest free short term credit card that can help them save and increase their buying power.

From an online merchant or e-commerce outfit’s perspective, offering BNPL as a check out function increases sales and expands their reach of products and services to a whole new segment of consumers.

What’s unique about BNPL vs a personal loan?

BNPL experience is often delivered at the time of check out. When a person is ready to pay for a product or service online, BNPL options show up as a check out option. Consumer might click on these check out options and a small prompt might ask the consumer to consent to certain things such as a credit check.

The experience then is brought back into the checkout process and the merchants are paid by the BNPL companies and consumers are happy with their product or service. They complete their check out process just like buying the product or services with a credit card.

The biggest difference between BNPL and applying for a personal loan is that the decision is made at the time of checkout and not using an online digital application at the consumer’s leisure.

BNPL originations process

Because the integration point is at the checkout process, any additional friction such as a long, multiple page application form might increase the chance of losing a customer.

The integration to the e-commerce system might be the key to consumer personal information without having the customers to fill out their information again. If the customer has been a customer of the e-commerce website, there is a chance for the e-commerce website to share that information with the BNPL players.

Their previous shopping history might be a key component in underwriting. If the customer is brand new to the e-commerce site as well as using the BNPL option as a check out option, the information provided right before the check out process could be used for BNPL players to pull credit.

BNPL underwriting process

If BNPL players want to pull credit at the time of check out, they have to take whatever information they can get their hands on to call an external credit decision engine.

The consumer won’t have minutes to wait for a decision. The credit decision round trip might have to be rendered within a second or two. This puts a tremendous pressure on the credit decision engine to make a quick decision and return that signal back to the BNPL and the online merchants to move the check out process forward.

Third party integration and credit decision rules all have to work in concert to produce a quick yes or no response back to the e-commerce site.

LendAPI Credit Workflow Orchastration Platform

LendAPI Credit Decision Engine

LendAPI’s credit decision engine has a visual rules editor as well as ready-made third party connections to some of the more popular identity as well as credit bureaus.

LendAPI’s decision engine also have a suite of APIs for BNPL players or merchants to quickly render a decision and bring it back into the checkout process.

Take a look at our full API guide at - https://lendapi.readme.io/reference/introduction

LendAPI Decision Engine Integration Guide

To use our decision engine, please register at www.lendapi.com and sign up at https://app.lendapi.com/signup/. We are happy to help you set up your credit underwriting rules as well. Write to us at info@lendapi.com