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BUY NOW PAY LATER - THE WAY IT SHOULD BE FOR CONSUMERS

Buy Now Pay Later - The Way it Should Be for Consumers

February 6, 2023

While the Buy Now, Pay Later (BNPL) sector has been dominated by specialty providers whose services are distributed at the point of sale via merchant partnerships, PYMNTS recently reported that 70 percent of BNPL users say they would be interested in getting BNPL services from their banks if such offerings were available. 

The BNPL industry is forecasted to surpass 900 million global users by 2027 according to Juniper Research and offers a flexible way to shop and pay. However, non-bank BNPL providers offer the service based on very limited customer data, putting both the provider and the consumer at higher risk.

For established financial institutions and challenger banks alike, that demand represents several major high-value opportunities. Consumers can receive the all-in-one financial experience they crave. Plus it enables the banks to more easily get into short-term credit, earn higher interchange rates, and take advantage of their banking data to lend to customers with less risk.

How BNPL works and who benefits.

“Buy Now, Pay Later is one of the fastest growing payment options in the market today - outpacing credit card payment growth according to recent reports,” Kevin Toney, Senior Product Manager at Galileo, said of BNPL’s rapid move into the financial services mainstream.

When looking at the advantages of BNPL for all parties involved, it’s easy to see why the service has caught on so quickly.

The Buy Now, Pay Later payment option allows a customer to purchase goods and services from a merchant, just as they would with a credit card. Unlike a credit card, however, BNPL includes the purchase price of the goods, plus any fees, upfront. Payment is then divided into a predetermined number of installments. That way, a customer using a "pay-over-time" model is made fully aware of what they will be paying in their installment plan from the outset, including the number of payments. 

“Galileo Buy Now, Pay Later is very flexible, transparent to the cardholder, and it can be used most anywhere Mastercard is accepted,” confirms Toney. “Paying with Buy Now, Pay Later is much clearer for the consumer than using a credit card. The customer will not be surprised by hidden fees on the back end nor endure high-interest payments over an extended period of time."

With this approach, the Galileo solution fosters responsible lending for banks and better expense management planning for consumers.  The days of BNPL being exclusively used for on-the-spot,  frivolous purchases are waning.  Now it can be used as a tool for important money management planning decisions or unforeseen emergency purchases.

Advantages of the Galileo Buy Now, Pay Later Solution.

Galileo’s bank-issued Buy Now, Pay Later solution differs from that of non-bank BNPL providers in a few key ways:

More informed (and safer) underwriting 

When it comes to underwriting BNPL loans, banks and fintechs have access to customer insights that non-bank BNPL providers could only dream of. This visibility by the bank into the user’s financial history provides a considerable advantage. This enables them to make stronger and safer underwriting decisions, including how much credit to extend, the number of installments, and other loan details–an important edge in light of some skepticism of the popular BNPL services.

Loan management system

With the Galileo loan management platform, clients can access repayment schedules, perform disbursements to virtual cards, assess fees and interest, process payments, and create charge offs1. A rare capability for processors, this platform gives banks and fintechs the flexibility of loan configuration options, while enabling them to focus more on the customer experience.

Flexibility and freedom

Galileo’s BNPL program is a flexible Mastercard solution with only a few guidelines that must be adhered to when clients execute the program: The virtual card must be single use, with a minimum transaction of $50. There is no predetermined maximum dollar amount; and there are no requirements regarding the number of installments2, frequency of payments, or fees. Terms of the program are flexible depending on the risk appetite and customer demand of the issuing client. 

A vast merchant network 

Part of the Mastercard Installments program, Galileo Buy Now, Pay Later has a broad merchant network. Mastercard single-use virtual cards can be used almost anywhere Mastercard is accepted, taking the burden of building a merchant network away from the program manager.

Increased interchange rates

Mastercard’s single-use virtual cards grant more interchange revenue at popular merchants than traditional debit and credit products.

Galileo’s ecosystem

Clients have the option of offering Galileo’s BNPL solution in conjunction with their deposit accounts serviced by Galileo, which simplifies payments and disbursement and makes overall program execution more seamless.

Bottom line.

Galileo’s Buy Now, Pay Later solution offers banks and fintechs a unique ability to offer a safe and convenient lending option to their customers.

Consumers today have more ways to pay than at any time in history, and more and more of them are choosing BNPL to get the goods and services they want and need...
Kevin Toney
Senior Product Manager

To learn more about capturing part of this market opportunity, check out the Galileo Buy Now, Pay Later Product Guide or watch our on-demand webinar.

1Galileo Financial Technologies, LLC is a technology company, not a bank. Galileo partners with many issuing banks to provide banking services in North and South America.

2Programs with over 4 installments will be subject to Reg Z guidelines

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