Driving Financial Inclusion With BNPL and Smarter Decisioning

Driving Financial Inclusion With BNPL and Smarter Decisioning

by August 18, 2021

While news headlines broadcasting Buy Now, Pay Later’s (BNPL) incredible adoption trajectory are a daily occurrence, innovative lenders know that BNPL offers more than a growth story.

It’s an opportunity to make headlines about how their business is empowering consumers and driving significant growth in financial inclusion across the Asia Pacific region.

BNPL: Good for Consumers

For many BNPL’s role is to provide consumers with a better checkout experience and interest free alternative to credit cards, it also offers the promise of being able to provide easily accessible and sustainable credit to non-banked and underbanked consumers.

John Warren

John Warren

“With the average funding amount requested often under $200 in the ASEAN market, and the approval process less complex, BNPL provides the perfect stepping-stone for consumers who would not qualify for or may have already been turned down for more traditional credit products.”

said John Warren, General Manager – APAC at Provenir.

“Gaining access to accessible and affordable credit provides people with the ability to take a step towards their aspirational goals. It can be a life changing opportunity for many of these individuals, and an incredible opportunity for businesses to have a meaningful impact on people’s lives.”

BNPL: Smart for Businesses

Lenders often shy away from the non/underbanked population, not because they’re a known default risk, but because lenders aren’t as confident about predicting the credit risk of individuals who don’t fit traditional credit profiles.

In Asia alone there’s an opportunity to onboard 1 billion underbanked people as new customers if you can find the right way to accurately predict the credit risk of thin file and credit invisible consumers.

But when you overcome that challenge, not only will you empower their next step on the financial ladder but also power business growth.

It’s good for consumers, and it’s good for your business.

Evolving Your Risk Decisioning to Power Financial Inclusion

To support and empower the credit invisible, you need to create a strong risk decisioning foundation that supports these four key pillars:

Access to Alternative Data – bypass traditional credit scores without increasing risk

With traditional credit scores not an option when decisioning applications from credit invisible individuals, you need to be able to easily identify the right data sources and democratise access to that data across the credit lifecycle.

For example, a combination of multiple types of alternative data will be needed to support seamless onboarding and credit risk analysis, this data feed may consist of a combination of telco, social, behavioral, location, transactional, and many other data types.

In fact, 62% of lenders say that using alternative data helped them build profitable new markets.

1. Supports Powerful Analytics Capabilities – Rethink Your Underwriting

With 78% of lenders finding it a significant challenge to evaluate the credit worthiness of non-prime consumers, the need for powerful risk analytics capabilities is clear.

You need model agnostic technology that empowers your risk team to use a wide variety of predictive and ML languages to develop and test new risk models using alternative data.

But building and deploying risk models is just one key aspect, you also need a solution that’s capable of running these models in real-time, so that you can analyse alternative data and generate accurate credit risk predictions without sacrificing the consumer onboarding or merchant checkout experience.

2. Global Support for Regional Data and Product Strategies – Maintain Compliance Across Countries

Maintaining compliance with differing legislation across countries is a major concern for lenders.

With businesses often looking to launch and expand BNPL products in multiple countries keeping track of data use in each country can be complex and time consuming.

To simplify and manage your risk strategies across each country you expand into, look for technology that empowers a global strategy that can be regionalised with different types of alternative data to comply with local legislation.

This empowers you to maintain a global risk policy that can be localised in line with your risk strategy

3. It Empowers Agility – Flexibility to Support Evolving Legislation

As with all new and evolving products/credit features, the legislation controlling how BNPL can be decisioned and used is rapidly evolving.

As the creator and leader of BNPL solutions, it’s fair to assume that the legislative changes happening in Australia are indicative of how the rest of the world may react.

To create a future-proof BNPL product, you need technology that will keep you on the right side of evolving legislations.

Which means, you need to be able to quickly make changes to data sources, adjust decisioning models, increase affordability checks, and make any other process updates as needed.

With the power to take control of your risk strategy you gain the agility to maintain the availability of your products and continue to support consumers, even as legislation evolves.

4. From Credit Invisible to Credit Worthy

What stands between your business and making headlines about your role in taking credit invisible individuals to credit worthy customers is the desire to make a difference and the technology to power to it.

Download Provenir’s e-book to discover the 8 features of fast and future-proof BNPL technology.

Provenir BNPL

Feature image credit: edited from Unsplash and Pexels