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Five Business Models to Compete to Buy Now, Pay Later

Allison Janney
Lenovo Many GEOs

Buy now, Pay later uses a financial model which allows consumers to buy a product in present time and pay for it in the coming days. The module allows for the payment to be returned in equal monthly installments (EMIs) over the course of whatever time period available.  

As a business model, BNPL is a consumer based service, which tales the buyer’s accessibility to finds and works for them. For any business to compete against this model, it is important for them to completely understand the extent of work that BNPL does and focus on working through the benefits that Buy Now, Pay Later provides. The banks and merchants who are at the end of the day, the main contenders of this model, need to reassess their position as well as the implications of BNPL model. 

Integrated shopping apps

To begin with, any bank willing to compete with the model of Integrated shopping apps will have to look into the the whole process of purchase journey. The BNPL system is not merely a financial model, but an assistance method which ensures that even at places where the solution of Integrated shopping apps is not present at the checkouts.

Furthermore, the transaction between the merchant and the consumer is not a simple relationship anymore. There is a new kind of engagement via methods such as affiliate marketing and making money via the amount that was involved in the transaction. 

Furthermore, apps like Klarna with is an Integrated Shopping App not only provides the customer with schemes such as BNPL, but allows their network to be an open into the banking systems. For new users, this eases the burden of understanding difficult problems. 

Furthermore,  with a strong customer based understanding, it is important for banks and likewise competing models to invest in anti-hacking and fraud tools. It is not the time limit of payment which needs to be re assesed, but the consumer to whom this service is being offered. It is important to quickly understand whether consumers can be frauds and the recognition of the same needs to be quicker. 

In the end, it is the branding which propels any business model further. In order to ensure a successful competition to BNPL model, banks and merchants need to invest into the branding like BNPL systems have. 

Off-card financing solutions

This financing solution works for people who deal with a larger amount of sum. The relationship between consumer and merchant. There is a great commodization of this method, with the usage being limited to once or twice a year for most consumers. When merchants are working to prepare a business model, they need to be aware of the same. 

To battle the upcoming card-linking updates it is necessary to for merchants to develop a system which works as service based players. 

Virtual rent-to-own models

This model, known as VROs, work with larger models in order to work with things that can be repossessed. While that is what the assumption for the goods is, it is not always the case. This model extends to the purchase of furniture as well as electrical appliances. 

These appliances are either bought digitally or at a second and third option through physical means. For this business model, there is a huge window of opportunity for collaboration with big players in order to enhance this credit box and further make the whole scheme as compelling for merchants as they can. 

For others, the issues that exist in the system can be addressed directly through the card solutions that already exist. It is important for models to look into the business systems and change the wheel of work accordingly. 

Card-linked installment offerings

Card linked at purchase are not the most successful business model, but with some clear consideration can certainly develop to be so. First and foremost, they can enable merchant-subsidizng offer. 

Then, something that makers of models can look into is the customization of prepurchase journeys. Consumers can definitely select what kind of installments they want to pay with and how they can work on the following transactions. If issuers look depe into the issue and offer solution to the card-linked installments there is a great chance of it taking off. 

The most important part is actually integrate it through the purchase journey rather than it being stuck at one place. By monetizing the prepurchade offerings, the differentiation will help in the growth of this model.

Vertical-focused larger-ticket plays

This model is closely associated to healthcare and home improvement. The ticket sizes can range between large amounts- for healthcare they can be anywhere between $2,000 to $10,000 while for home improvement it manages to cover a larger expanse of $5,000 to $50,000. 

Here, players achieve the the scale by partnering up with the original manufa turers instead of getting assisted by a mid trader, knows as original equipment manufacturer or OEMs. One of the examples of the same is Solar Financing, which while still growing, has a great opportunity to improve the financing volumes for home equity lines. 

One of the important things to focus on this model is the subcategories. Each player- bank or merchant will have to chose some subcategories rather than trying to hold over the entirety of the coverage. 

The above discussed five models are some of the ways in which banks and merchants can compete with the ever growing Buy Now, Pay Later model. It is important for them to change with the flow of time. Some of things that the players can further keep into consideration are as follows:

  • First and foremost, the players need to understand the multiplicity of options availble for the consumers and change their model accordingly. The traditional credit builders have already changed massively and the lines between different ways haveam but blurred. The Banks need to be less specific about the products and accept the ever changing landscape put in front of them. While managing the risks, they should be able to benefit well.
  • As discussed in various different models, the most important part of the business models is a relationship interactive essential throughout the journey of purchase. It is not merely about the financial work done by the cards or credit, but the rewards and offers that start from the manufacturer and all the way up to the consumers. 
  • The biggest hurdle is the rate of interest on cards which BNPL models benefit from greatly. If Banks rethink this strategy and make their models with less or even zero interest, there is a chance for growth of the models. Furthermore, relationship developed with merchants will definitely ensure a good scaling if this phenomena.

In the end, Banks and Merchants do need to rethink their economic strategies as well as structured if they want to compete against the existing models such as Buy Now, Pay Later. With the uncertainty of times, especially with the sudden COVID collapse or market and an affinity of transparency among the younger generations after millennial, banks need to restructure their models to suit the needs of the upcoming group of people. As of now, the change is slow, but as the reins of the corporate world slowly shift into the hands of a different generation, it is determined to change.


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