How banks can leverage their existing credit portfolios to unlock the power of BNPL

Evolving beyond mere disruption, BNPL has become a transformative force, revolutionising consumer credit by providing unprecedented convenience and flexibility to shoppers worldwide.

In recent years, the BNPL space has exploded with a myriad of players, notably dominated by specialised providers like Klarna and Afterpay. These pioneers have gained market share by deploying the 'follow the seller' strategy, integrating BNPL services via merchants to drive new sales. However, as the market continues to evolve, there's a significant opportunity for those adopting the 'follow the customer' approach, which allows cardholders to decide which merchants they want to use BNPL at.

Amidst the multitude of fintech providers targeting merchants, traditional banks stand uniquely positioned to serve consumers. Boasting substantial customer bases and long-standing relationships built on trust, banks are well-equipped to step into the BNPL arena.

Banks that want to take advantage of this opportunity are currently trying a few different approaches. One such approach is utilising their existing credit portfolios. By incorporating BNPL instalments to their credit products as a payment option for their cardholders, rather than treating it as a separate product, banks can leverage pre-approved credit lines to offer a fresh, convenient, and flexible approach to borrowing. This move offers a quicker route to market for the bank, while presenting an avenue to significantly improve customer satisfaction, as well as serving as a powerful strategy to expand their customer base. In fact, according to a recent study from Accenture, banks that tie BNPL features into their credit card programs will be the one fuelling growth in this sector.

Utilising this approach should theoretically make the transition to offering BNPL a more seamless and smoother journey for banks, compared to going down the route of establishing a separate product offering. However, despite the apparent benefits, integrating BNPL into credit card portfolios can pose challenges for banks that lack the necessary technical infrastructure and modern banking platforms to ensure seamless integration, and this should be taken into consideration when formalising their BNPL strategy.

Integrating BNPL into credit card portfolios is a transformative move that not only aligns with changing consumer preferences, but also ensures that banks remain relevant in an increasingly competitive financial landscape. Banks that are successful in delivering on this can position themselves as forward-thinking financial institutions that enhance their product portfolios to prioritise customer-centric innovation.