HomePayl8r BlogIndustry InsightsWill Open Banking improve the Buy Now Pay Later experience?

Will Open Banking improve the Buy Now Pay Later experience?

Buy Now Pay Later (BNPL) continues to be a popular payment option due to its promise of increased payment flexibility. Providers are expanding globally, offering the benefits of deferred payments without the traditional lending headaches.

Both merchants and consumers benefit from BNPL’s services. During the pandemic, BNPL was particularly useful as it allowed shoppers to split payments into smaller chunks, making it easier for some to afford necessary goods despite sudden unemployment or reduced working hours.

BNPL (Buy Now Pay Later) is becoming more attractive to businesses because they are facing cash flow issues caused by factors like economic conditions and supply chain problems. The flexibility of receiving money quickly and in a more flexible way is especially appealing to businesses.

The current challenge is to make the most of the advantages of BNPL while also enhancing customer protection and transparency through the upcoming regulatory changes.

The ethical considerations surrounding BNPL must be carefully managed to ensure customers are not overburdened with debt while still having access to flexible payment options. Open banking may offer a solution to these challenges.

What is Open Banking?

Open banking is a system that allows financial institutions to share customer data with other financial service providers through a secure and standardised technology. This enables consumers and businesses to have more control over their financial data and how it is used. 

When using open banking, customers can choose to share their banking information with third-party providers, such as budgeting apps, investment platforms, or loan providers, to access a range of financial services and products. 

This allows for faster and more efficient payment processing, making transactions smoother and more seamless for consumers and businesses.

How does Open Banking work?

Open Banking improve the Buy Now Pay Later experience

Open Banking is a secure way for banks and other financial institutions to share customer financial data with third-party providers through application programming interfaces (APIs). This allows customers to give permission to other financial service providers to access their account information.

To use Open Banking, customers must first give explicit consent to share their data with a third-party provider. Once authorized, the third-party provider can access the customer’s financial data through the bank’s API, which provides secure access to account information, transaction histories, and other relevant data. 

The third-party provider can then use this information to offer personalized financial products and services to the customer.

Open Banking makes financial transactions more secure by requiring strong customer authentication and encrypting data during transmission. This helps protect customer data and ensures only authorized third-party providers can access it.

Is Open Banking Safe?

Open Banking is designed to be safe and secure for both consumers, banks and institutions. The system is heavily regulated, and all parties involved must follow strict data protection laws and security protocols. Open Banking also helps to reduce the risk of fraud by allowing customers to approve transactions and access their accounts in real-time. This means customers can quickly identify any suspicious activity and take appropriate action. Additionally, Open Banking enables customers to access more competitive financial services, as banks and institutions are able to offer more personalised services tailored to the customer’s individual needs.

Banks and financial institutions are required to implement robust security measures, such as encryption and multi-factor authentication, to protect customers’ data.

Additionally, customers are protected by liability limits and dispute resolution mechanisms in case of any unauthorized transactions or fraud. Overall, while no system is completely foolproof, Open Banking is designed to be safe and secure when all parties involved adhere to the established security standards and protocols.

How can Open Banking help Buy now pay later?

Open banking is beneficial for Buy Now Pay Later (BNPL) because it provides a more streamlined and secure way for lenders to assess a customer’s creditworthiness. By utilizing open banking, BNPL providers can gain real-time access to a customer’s financial data and credit history, allowing for more accurate assessments of whether or not they are qualified for financing. 

Open banking also offers customers a more transparent and convenient experience when using BNPL services. Customers can easily access and share their financial data with BNPL providers, ensuring that they receive accurate and personalised offers. 

This not only helps customers make informed decisions about their purchases, but it also helps BNPL providers tailor their services to better meet the needs of their customers.

In addition, open banking enables faster and more secure payments, which is particularly important for BNPL providers who need to ensure that payments are made on time and in full.

How do Payl8r use Open Banking?

We have the ability to provide financing based on both creditworthiness and affordability. This means we can extend loans to individuals with limited credit history, such as the millennial market, while ensuring that they can comfortably afford the repayments.

Instead of outright rejecting a finance application solely based on a person’s credit file, we offer an alternative solution. Payl8r gives customers the opportunity to electronically submit a 120-day bank statement, which allows us to assess their affordability. 

This approach not only enables us to lend to a wider range of customers but also serves as an additional measure to prevent fraudulent transactions for purchases exceeding £1,000.

The utilisation of electronic bank statements proves to be an effective tool in boosting conversion rates. 

We have seamlessly integrated this process into our application form, which takes less than five minutes to complete.

Payl8r Logo - White

Payl8r are pioneers of fair and responsible lending.

For Business

Contact Us

Social Money Ltd t/a Payl8r, a company registered in England under company number 08054296, and is authorised and regulated by the Financial Conduct Authority, and is entered on the Financial Services Register under reference number 675283. Registered with the Information Commissioner’s Office under reference number ZA026178.

© Payl8r | All Rights Reserved