BNPL extends line of credit for consumers
The rivalries in the financial services industry are legendary. Companies and their leaders at the time made no secret of their competitive obsessions and their desire to be on top. There was Citi against Chase; Sandy Weill vs. Jamie Dimon. Or there was Goldman Sachs versus Morgan Stanley; UBS v Credit Suisse. And although they are adjacent to the financial services industry, it’s hard to rule out Microsoft against Apple and even the current battle between Apple and Facebook.
Competition is a way of life in payments. In fact, there is a temptation to treat it a bit like a horse race – where the advantage or leap forward of each company is interpreted as a new hurdle for their competition. The more competitive the space, the more the framing of horse races tends to dominate.
But maybe this winning spirit isn’t as important as it used to be. Take, for example, the buy now, pay later space. It is, lately, a very competitive space. He dedicated new breed companies like Klarna and Afterpay. It has innovators like PayPal looking to make a name for themselves in the space. Not to mention the old guard like American Express and Visa. But like the BNPL firm SezzleCEO of Charlie youakim Karen Webster told PYMNTS in a recent conversation on ConnectedEconomy ™, the idea that there always has to be a definite winner straddling a group of losers may not be the best framework for the situation.
“One piece of advice I always give to business leaders, especially new entrepreneurs, is that this is not a zero-sum game,” Youakim said. “If you play it like a zero-sum game, you’re going to create a lot of friction for yourself along the way. It’s always a one plus one equals three activity. And that is, the more you can do that, the more you create, widening the pie for everyone, even the competition.
Ripe for expansion
BNPL has been a rapidly expanding platform over the past year to connect consumers who may be averse to credit cards or young consumers uncomfortable with the general concept of debt. BNPL has also provided a point of connection between merchants and consumers looking for an alternative to credit cards or who have too low credit scores to make them viable. As a recent report from PYMNTS showed, 32% of consumers who said they had trouble paying their typical monthly expenses used BNPL solutions for their Black Friday transactions in November 2020. Other research showed that 48% of consumers who prefer to use some form of point-of-sale (POS) credit – including BNPL – said it would not shop from merchants who can’t support it.
For Youakim, consumers don’t need BNPL, but they prefer it. BNPL is, at the base, a more reliable and transparent offer for the customer and which he looks for more and more and is proving to be decisive in his purchasing decisions. It means, conversely, that it becomes something that traders need.
“If you are a merchant and you are competing with someone else in your space and they have our product on their website, your competitor will have an advantage,” he said. “And so I think that’s what makes it a must-have for traders. And the benefit is because consumers like this form of credit. And we all know when given the option to wait six weeks, what happens is the customer may just forget about it or find a different product somewhere else, which leads to a lost sale.
The front door of the mobile
Sezzle serves a large segment of consumers who would find it difficult to access other forms of credit. Over 50 percent of its consumers have FICO scores below 600 or no score at all. These consumers are highly mobile (90% of Sezzze’s translations arrive via mobile) and are better equipped participants in the connected economy.
This means that the question going forward for Sezzle is how to create more of these connection points and make them count. This included the introduction of new products like Sezzle Up, which is designed to help consumers improve their credit scores. This is essentially the same product as his basic installment loan, although it is reported to the credit bureaus. Sezzle is also looking, in partnership with Ally Bank, to launch a lightweight, longer-term product in six installments, to enable it to better serve merchants selling more expensive products that consumers may need a slightly lending period. longer. For traders, he said, they have developed a new tool called Sezzle Spend which will allow traders to essentially cut down on their products, but in a “hidden by Sezzle” way.
Sezzle’s focus has not changed, although the company has moved from its core BNPL offering to a commerce ecosystem that gives customers a better way to find new merchants and manage their payments when they switch to the box. The goal remains as focused as it ever has been on providing consumers with better tools to manage their financial lives.
“People always ask us if you don’t create a chance that [customers] could go out of your product and switch to a credit card, ”Youakim said. “And my point is that I don’t care. We will try to convince them to stay with us because they can use the credit card in our system. But I think the right business approach continues to do well by your stakeholders and good things will happen because they trust you.