Traditional financial institutions are launching buy now pay later solutions globally

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As the Australian government decides how strictly to regulate the BNPL industry in the country, Westpac, one of the leading financial institutions in Australia, announced the launch of a new PartPay feature. The service enables existing credit card users to pay in four instalments.

• The firm’s decision to implement the credit card method, instead of offering the service via merchants, was primarily influenced by the necessities of customers, rather than a motive to increase profits. According to the firm, 40% of the customers who have BNPL have also used credit card.
• Westpac has joined a growing list of banking institutions offering BNPL product to their customers in Australia. Commonwealth Bank of Australia and National Australia Bank have also launched BNPL service in the past in Australia.

Westpac has been one of the most vocal about regulating the BNPL industry. In its submission to the government, the firm has asked to adopt the most severe regulation for the sector, which requires BNPL providers to adhere to standards followed by credit card providers.  In Australia, the BNPL sector has been struggling due to high fixed cost base, rising defaults, and the inability to pass rising interest rates to merchants or end customers. These factors have resulted in the decline of players like Openpay, which entered into receivership and suspended operations in early 2023.

Like Westpac, Absa Bank in Kenya have also launched a BNPL product for its credit card holders, enabling them to make purchases using the credit limit available on their payment cards.

• The Absa Buy Now Lipa Pole Pole solution is a first of its kind BNPL scheme launched a traditional banking institution in the Kenyan market. Through this, the bank is seeking to increase the value proposition for its customers, while attracting new credit card users. The innovative payment method enables users to defer their purchase payment over a period of three to 12 months.

The Central Bank of Kenya data reveals that as of March 2023, there were 5,669,185 card-based transactions. This represents a 5.3% increase from the transactions recorded in February 2023, demonstrating the increasing appeal and convenience of card payment options. Offering a BNPL facility on its credit card will, therefore, make card-based payments more appealing to customers in Kenya. Absa Bank will also gain a competitive advantage over its competitors from the short to medium-term perspective, as the BNPL solution is growing into popularity in the region.

Asia United Bank, in September 2022, entered into a strategic partnership with Atome and MatchMove to launch a BNPL credit card in the Philippines market, where the adoption of BNPL services has been growing at a rapid rate. The collaboration between the three firms is expected to boost financial inclusion among the unbanked and the underbanked category. For Atome, the BNPL card will aid the gross merchandise value growth from the short to medium-term perspective. Shoppers can make use of the BNPL credit card to make purchases online and in-store where Mastercard is accepted.

In the Philippines, Atome has been rapidly expanding its presence in the offline retail segment. The firm, in March 2023, also collaborated with Suyen Corporation to bring the BNPL payment method across 600+ physical stores in the country. Atome, in December 2022, also partnered with drugstore chain Watsons to offer BNPL scheme for health and beauty products at the latter’s 947 physical stores in the Philippines.

• PSCU, in April 2023, announced the launch of a new solution enabling credit unions implement BNPL. The solution gives existing credit card holders the ability to budget and plan for larger purchases.

The implementation of BNPL facility also gives a chance to credit unions to promote their credit cards to consumers that are interested in the BNPL offering. This, in turn, is expected to drive increased interchange revenue, deposit balances, and credit union brand visibility.

The instalment solution, which is experiencing a growth share of total e-commerce purchases, can drive significant revenue growth for credit unions over the next three to four years in the United States. The instalment solution offered by PSCU lets credit unions use member data to customize the criteria for BNPL plans. This solution allows credit unions to choose suitable offers and determine eligibility, while also setting fixed monthly payments with a pre-established Annual Percentage Rate (APR).