Post-purchase off-card BNPL: How it works and why it appeals to banks

The Buy Now Pay Later (BNPL) market has seen explosive growth, with global usage increasing six-fold between 2019 and 2023, according to the Bank for International Settlements (BIS). As industry players rush to stake their claim in this thriving market, it has become clear that BNPL is far from a one-size-fits-all solution. As a result, various models have emerged, each with its unique characteristics and appeal. One of the most prominent among these is the post-purchase off-card BNPL model. But what exactly is this model? How does it work, and who does what businesses is it suitable for?

Understanding the appeal of post-purchase off-card BNPL

Post-purchase off-card BNPL provides customers with the flexibility to purchase items upfront in full and then pay for them in instalments afterwards, without needing a specific card or interface at the point of sale. Customers make their purchases as usual, and afterwards, they have the option to convert those purchases into manageable instalments, providing them with greater flexibility to manage their cash flow. This model particularly appeals to consumer banks as it can seamlessly fit into their existing infrastructure, eliminating the need for banks to manage merchant relationships or integrate with online shops and point-of-sale (POS) terminals.

The benefits of this model have not gone unnoticed. According to a recent PYMNTs report, 60% of millennials express interest in using BNPL products from a bank. Eager to meet this growing demand, several banks have already launched their post-purchase off-card offerings utilising, with notable examples like Monzo's Monzo Flex.

How post-purchase off-card BNPL works

Here's a closer look at what a typical payment using this model looks like:

1. Initial purchase: A customer pays for an item or service in full at the point of sale
2. Opting for BNPL: After the purchase, the customer can opt to use the BNPL model through various channels such as mobile banking apps, ATMs, kiosks, or call centres
3. Selecting an instalment plan: The customer selects an instalment plan tailored to their needs. These payment plans can be customised based on the type of purchase, duration, and interest rates, providing customers with greater flexibility to manage their cash flow. Providers may choose to impose limits and restrictions on eligible transactions to mitigate risks
4. Provider reimbursement: Once the instalment plan is confirmed, the BNPL provider (bank) reimburses the purchase amount to the customer’s account
5. Repayment: The repayment cycle begins, with the customer paying back the amount in instalments as per the agreed plan

Post-purchase off-card BNPL is just one of the many innovative models reshaping the BNPL landscape. Its seamless integration with existing banking infrastructure and appeal to modern consumers make it a compelling option for banks looking to expand their credit offerings. But this is just the tip of the iceberg. There are several other BNPL models, each with its unique advantages that suit different businesses. To explore these options and find the best fit for your business, check out our ultimate guide to BNPL.

Other blogs in this series: Card-linked BNPL | Merchant-funded BNPL | At-purchase off-card