Maximize Value Across the Entire Customer Lifecycle
8 Features of Fast + Future-Proof BNPL Technology FUTURE:
TO THE
Back to the Future: 8 Features of Fast + Future-Proof BNPL Technology
The premise of the Back to the Future movie is simple: Marty, a high school teenager in the 80s, finds out that something that happened in the past will have a huge impact on the present if he doesn’t fix it. He travels back in time to the 50s via a DeLorean car. Solves the problem despite the attempts of Biff to ruin it. They all live happily ever after, at least until they need a plot for the second movie. Why is this relevant to the world of Buy Now, Pay Later (BNPL)? Because it’s an easy way to make the point that the decisions we make now will impact our success in the future. And while Marty had the ability to hop back in time at his leisure to solve his problems, the rest of us don’t have the luxury of a time-travelling DeLorean car at our fingertips. At least not yet.
choosing the right technology to take advantage of an $8 trillion opportunity. You can take the path of Biff the antagonist and push for hard-coded, less agile options. Or, you can be Marty the hero, and implement a fast and future-proof risk ecosystem that supports success—despite whatever plot twists are thrown your way. The decisions you make now will have a direct and tangible impact on the future adaptability, growth and longevity of your BNPL products. So, how do you know which technology can help you prepare for the future of BNPL? Quick note: While BNPL can fall both inside and outside of what is considered a traditional ‘credit’ product, for ease of understanding we will be using the term to describe it throughout this eBook.
Think of it this way, if BNPL was a movie, the plot would hinge on
Your future hasn’t been written yet.
No one’s has. Your future is whatever you make it. So make it a good one. – Doc Brown, Back To The Future
Fast and Future-Proof: The Plot Twists Driving BNPL Technology Needs Before we jump into the features of future-proof BNPL lending technology, let’s cover some of the key industry factors that play a heavy role in determining these needs: 1. It’s growing, fast. It’s estimated that BNPL borrowing will grow by 400% 1 over the next few years. It’s also a direct competitor to credit cards with BNPL providers’ eyes set on taking a bite out of the $8 trillion 2 industry. This combination means one thing: competition. The hungry startups see the size of the opportunity and want to be a part of the disruption. The credit card giants, in fear of losing customers, are moving to create their own solutions to prevent churn. 2. Legislation is looming. If there’s one thing with a terrible reputation for stopping innovation and disruption in its tracks, it’s legislation. But legislation, when it comes to protecting the financial well-being of your customers, is essential for a healthy and trustworthy industry. While some countries are further ahead on the legislation roadmap, like Australia and the UK for example, we still don’t have clear details on what legislation will look like around the globe. However, that doesn’t stop you from preparing your technology to support stricter lending rules.
3. The interest and credit check rebellion. BNPL providers have done an incredible job positioning their products to consumers who want an alternative to high-interest credit cards. In fact, research has shown that 37% of consumers choose BNPL specifically to avoid paying interest—a direct hit to the credit card industry. Another reason consumers give for choosing BNPL options is avoiding a hard credit check, either because they have a thin credit history or don’t want to take a hit on their score.
% of respondents who use BNPL for the following reasons:
https://www.fool.com/the-ascent/research/buy-now-pay-later-statistics/
4. The drive for financial inclusion. Financial inclusion is a hot topic for many reasons, the primary one being that the vast number of underbanked or unbanked across the globe are losing out on financial opportunities because they don’t have a traditional credit score. BNPL providers, who do not rely on traditional credit scores and often use alternative data to provide credit decisions, are in a unique position where they are able to drive financial inclusion and in turn help their customers achieve financial and aspirational goals.
BNPL Technology Needs: The 8 Solution Features That Will Power Your Leap into the Future and Power Growth. Feature 1. It democratizes data access This image is used often in data and analytics conversations:
Photo by Franki Chamaki on Unsplash
It’s used because people, especially if you work in data or analytics, can relate to it. In a high-risk industry, you already know that data is the foundation of your decisions. It informs everything you do from business strategy to individual customer decisions. But knowing that you need data, and being able to access it are two entirely different things. Data is only valuable if it’s in the hands of the right people, at the right time, in the right place. But unfortunately, most businesses settle for the minimum data they need. Research shows that 63% of financial services businesses still have a major problem when it comes to integrating new data into their analytics environment. 3 This obviously poses a challenge when it comes to decisioning BNPL applications… As we mentioned above, two of the driving factors behind the success of BNPL is the lack of hard credit checks and the availability to the unbanked. So, if you can’t use your traditional risk assessment model, what’s the alternative? While soft credit pulls are still a viable option for those with traditional credit scores, in a high-risk, rapidly evolving market you need to be
confident that your risk decisioning is both accurate and based on real-time information. Basic, soft pull credit checks, which often don’t report the most recent activity, can make your decisions riskier and less accurate. To make risk decisions you can be confident in and that drive financial inclusion, you need to look to data outside of the traditional credit score. And instead, turn to alternative data such as behavioral scores, telco information, transactional data and open banking to give real-time insights into affordability and risk. To support decisioning outside of the traditional credit score, you need to be able to leverage data from a wide variety of sources and also have the ability to quickly integrate and test new data to improve decisioning accuracy. This means you need technology that empowers your team to create new integrations with zero hard-coding. It means having technology that has prebuilt connections to data vendor APIs that reduce integration times to minutes instead of months. And, if you want real flexibility, it means having technology that makes it easy for your team to access and use data exactly where and when they need it, whether that’s in decisioning processes, onboarding processes, or performance analysis.
Feature 2. It powers real-time customer and merchant onboarding
If you’ve ever seen Back to the Future II, you’ll know that hover boards are the trendy, must-have item. Which means you need to make it really easy for merchants to offer BNPL options on their hover board sales, and you need to make using your BNPL product to buy those hover boards seamless. While we’re using a lighthearted example here, there are often times where BNPL purchases have a significant impact on consumers, such as for healthcare and small business purchases. When instant gratification is expected and often needed, technology that helps you prioritize the onboarding experience for both merchants and customers is essential. You need powerful automation capabilities that minimize the effort needed from your customers and relies on technology to perform the heavy lifting. Choose technology that can use automation to augment customer data with the additional information you need to perform robust compliance checks, identity verification and risk decisioning. All in real-time. If you can’t onboard customers in milliseconds, your competitors will. 60% of customers abandon applications for unsecured lending products during digital onboarding. 4
Image 3
Feature 3. It makes adding and updating compliance processes fast and easy The looming legislation has the industry, and the opportunity it offers, in a state of flux. You need technology that can act as your flux capacitor, making time travel possible. Obviously, we don’t mean that literally; what you need is technology that will keep you on the right side of compliance regulations now and at any point in the future, whichever countries you choose to operate in! In practical terms, this means having technology that makes it quick and easy to make changes to your processes, from adding in additional KYC processes, to ensuring all affordability requirements are met to keep your products fully compliant. To make your team, and in turn your business, more agile, your BNPL infrastructure should put you in control of implementing your strategy. One solution is technology that provides a no-code, drag and drop UI that empowers your risk team to update processes, add in new data sources and make changes exactly when they’re needed. This eliminates reliance on technology vendors and frees up your development team to focus on creating the IP that makes you unique and able to fully support your customers, and in turn your customers’ customers. One important item to note is that in addition to being able to make changes quickly, you also need to be able to maintain full auditability capabilities that show your commitment to fair and transparent lending practices.
Explore No-Code Features
Feature 4. It offers integrated fraud processes Like any growing industry, the fraudsters have already set their sights on BNPL services and have been quick to exploit the consumer-friendly onboarding and purchase experiences. To keep one step ahead of those looking to exploit weaknesses in the system you need technology that supports fully integrated fraud processes. Whether it’s robust AML and KYC tools, digital footprint tracking, transaction monitoring, simple integration or advanced fraud tools, you need a solution that makes your customers confident in using your services. Real-time data access and insights are an essential part of this. Catching fraud early in the process prevents bad debt being passed down the credit lifecycle! TransUnion estimates that fraudulent digital transaction attempts have grown by 46% globally since the beginning of March 2020. 5 Feature 5. It powers a continuous, real-time, learn and improve cycle With competition growing, being able to constantly improve your performance is essential. To do this you need easy access to performance data and the power to rapidly make changes to onboarding processes, models, credit line limits and more. Many companies struggle with seeing and responding to performance and decisioning data in real-time. To grow your BNPL business, it’s essential to invest in technology that allows you to monitor performance data as it’s happening and use that real-time information to identify innovation opportunities. Then that technology should make it easy to take those insights and make rapid changes to your processes. It’s a continuous improvement loop that drives innovation.
Some of the key features you need to look for to support a rapid learn, iterate and innovate system include: Real-time visual performance dashboards: this takes us back to the data democratization point above. It needs to be easy to get the right data into visual analytics tools so your team can spot insights that empower innovation. The ability to use performance and decisioning data to train and retrain models: constant innovation means constant iteration of your analytics models. Choose technology that enables you to retrain models in real- time, instead of waiting months to put updated models back into your production environment. Tools that support rapid changes: getting insights from data is one thing, being able to act on those insights is another. Many companies are reliant on development teams or their technology vendor to put changes live. Look for technology that puts the power of the process in your hands so you can make changes on your timeline.
GROW
Feature 6. Supports rapid time to market and diversification into new industries
The industry is currently made up of broad players who support a wide variety of merchants, and niche alternatives that focus on specific areas such as travel or healthcare. Much like Doc had to rework the DeLorean time machine from being powered by plutonium to lightning instead, in today’s unpredictable world it pays to be able to support rapid diversification when circumstances demand it. New niches bring both new opportunities and new risks, which means that you need technology that, for example, can just as easily power consumer BNPL as it can B2B BNPL. If you want to keep your options open when it comes to future strategy plans and targeting new industries, you need a solution that lets you get to market at record speed. There are a number of features that support this including simple data integration, a no-code UI for easy changes, rapid model deployment and even prebuilt reusable decisioning templates.
Feature 7. It can support the full customer lifecycle The goal of a BNPL product isn’t just a one purchase and done exchange, it’s an ongoing relationship. Because of this, your technology should empower you to grow and nurture that relationship throughout the customer lifecycle. Look for solutions that can support everything from onboarding to fraud management and ongoing credit line management to collections. Using a risk decisioning ecosystem to manage the entire lifecycle results in smarter decisioning and superior consumer experiences. Why? When all of your customer and decisioning data is consumable by that ecosystem it prevents the data silos that stop you from fully identifying risk and empowers the rapid iteration and innovation mentioned above. It also means that instead of using multiple systems to manage different parts of the customer lifecycle, you’re able to use one robust decisioning solution to tackle many processes. It’s both more efficient and more cost-effective.
Reach Your BNPL Goals
Feature 8. It offers model flexibility
Your BNPL solution should be an accelerator of model deployment and improvement, not a roadblock. Research from Rexer shows that 61% of data scientists expect model deployment delays. Surveys results show that it often takes weeks or months for models to go live, with many never making it through the deployment process. 6 There are a number of solution attributes that can help make deployment easier. For example, recoding a model instantly adds weeks to your timeline, while model agnostic solutions eliminate these recoding delays and help you push models out faster. It also means that your team can work in the modeling language of their choice, not the language your technology requires. Machine learning model retraining can also be a sticking point. Whether based on model drift parameters or a predetermined schedule, retraining models can be a time-consuming process. Solutions that feature ML Ops capabilities that allow you to retrain models in real time can make an incredible difference to your decisioning performance! If you’re one of the many businesses that are struggling with data science talent shortages and could benefit from support with model creation, you should look at solutions that offer prebuilt or custom- built models to alleviate the impact those shortages have on your organization. It can be a great way to accelerate your time to market or make a strategic shift in your risk strategy.
Your Personal DeLorean: Technology to Choose Your Own Future With the right technology, you can adapt to any and all plot twists in the emerging BNPL industry. You’ll have the power to innovate and iterate to stay ahead of growing competition. You’ll have the agility to adapt to new legislation with zero business interruptions. You’ll have the data you need to make accurate risk decisions using alternative data instead of credit checks. And, you’ll be able to support the unbanked and underbanked with easily accessible credit products. Perhaps most importantly, you’ll be in a position to provide world-class customer experiences. Marty McFly: Hey, Doc. You’d better back up,we don’t have enough road to get up to 88. Dr. Emmett Brown: Roads? Where we’re going,we don’t need roads. – Back To The Future
Data Cloud + Marketplace – your one-stop fintech data ecosystem Offering easy, rapid integrations to a wide range of global data sources and using one single API to connect to many data types, including credit, fraud, open banking and alternative data. Access and use data across decisioning workflows in minutes to get new products to market faster. Decisioning Cloud – make smarter decisions, faster Automated risk decisioning workflows that offer real-time approvals. Instant decisioning processes enable you to increase revenue and create superior customer experiences without compromising risk. Empower your business users with no-code UI and drag and drop functionality. Insights Cloud – ingest data, extract value Get real-time views of your decisioning performance to uncover actionable business insights. Combine decisioning data, third-party data and historical data to underpin a data-driven strategy, and train and retrain models. Visualize performance and innovate faster with customized dashboards available across your entire decisioning ecosystem. Solutions Cloud – powered by Salesforce, decisioned by Provenir Create applications in our case management solution for Salesforce and send to the Decisioning Cloud for instant approvals. Connect to get instant case management capabilities for rapid deployment. Simplify managing your application funnel with preconfigured dashboards. Provenir: Your Fast and Future-Proof Risk Decisioning Ecosystem The Provenir Cloud Suite offers four products with endless possibilities! Managed through one centralized UI, the Cloud Suite elevates your digital decisioning capabilities to a risk decisioning ecosystem. It’s a powerful solution to all of your decisioning, data and analytics needs, letting you deploy, learn, adapt and iterate at record speed.
Built on a Foundation Inspiring Innovation
Let Provenir’s cloud-native technology drive your innovation. Designed and built to power agility, Provenir’s cloud-native technology puts your team in control. Independence replaces vendor reliance. Seamless support for business growth replaces unscalable technology. With state- of-the-art data science features on a cloud-agnostic platform, your decisioning is driven by AI and machine learning to improve accuracy. You’ll benefit from the agility, flexibility and security needed to compete in a digital world. Use the no-code Cloud Suite, with its user-friendly drag and drop interface, to take control of uploading, testing and deploying models and decisioning workflows. And rely on the Provenir platform-as-a- service model to benefit from developing, QAing and deploying your risk decisioning environment on constantly advancing technology.
About Provenir Provenir helps fintechs, financial institutions, and payment providers make smarter decisions faster by simplifying the risk decisioning process. With one unified digital experience powering four cloud products — decisioning, data, insights, and solutions — you can create the platform-as-a-service cloud that best fits your needs. Whether you choose one or multiple clouds, making changes is fast and easy. Clients use Provenir’s technology, to easily design, build, and deploy solutions to solve complex business challenges such as digital onboarding, retail financing, BNPL approvals, SME lending, insurance, and credit card management plus innovation in areas like eCommerce, eWallet, digital banking, and embedded finance. Its no-code, cloud-native SaaS products make it easy to rapidly create sophisticated decisioning workflows. With a global data marketplace for seamless integration, powerful AI & machine learning models, and real- time insights, Provenir has supercharged decisioning speed. Rest assured your data is fully encrypted and SOC compliant. Provenir works with disruptive financial services organizations in over 40 countries and processes more than 2 billion transactions annually. Provenir helps fintechs grow from startup to decacorn and banks embrace fully digital strategies.
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Endnotes 1 https://thefinancialbrand.com/108781/threat-opportunity-buy-now-pay-later-bnpl-pay- ments-trends/ 2 https://www.cbinsights.com/research/report/buy-now-pay-later-outlook/ 3 https://www.institutionalassetmanager.co.uk/2021/02/08/295579/nearly-two-thirds-finan-
cial-services-firms-struggle-integrate-data-and-analytics 4 https://www.crnrstone.com/our-story/in-the-news/
5 https://www.globenewswire.com/news-release/2021/03/23/2197631/0/en/One-Year-after- COVID-19-New-TransUnion-Research-Shows-Digital-Fraud-Attempts-Against-Businesses- Have-Increased-by-46.html 6 http://www2.cs.uh.edu/~ceick/UDM/Rexer2015.pdf
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