At a time when financial flexibility is becoming increasingly important, fintechs must be able to meet this need effectively. This need has driven the rise of Buy Now Pay Later (BNPL), where consumers can split their purchases into multiple smaller payments. As a result, merchants benefit from higher-value sales, and customers enjoy greater flexibility. Visa, the global leader in digital payments, has a range of solutions designed to help companies offer BNPL services to their users.
As part of the Visa Fintech Initiative: Sri Lanka, which was organized in partnership with Hatch, the payments leader introduced these BNPL solutions to local fintech startups. The initiative featured a webinar hosted by the Director of Debit, BNPL, Prepaid Products, and Analytics (India & South Asia) at Visa, Krupalu Gharekhan. Alongside an introduction to the company’s BNPL portfolio, he also offered insights into global BNPL opportunities featuring examples of successful startups. Here’s everything we learned about this rising fintech phenomenon at the Visa Fintech Initiative: Sri Lanka.
BNPL is a fast-growing global phenomenon
Over the past year, the BNPL market has grown rapidly. Yet, there remains the need for more clarity about the different offerings available in the broader marketplace today, partly because other offerings like loans and credit cards share similarities. To put it briefly, BNPL, in this context, refers to installment-based fintech solutions managed by a fintech company that is not a bank. On the other hand, credit cards are often very bank specific with lending amounts and credit limits.
The flexibility of BNPL fintechs is that they are not tied to one specific bank and have greater flexibility when it comes to defining the number of installments for purchase and the size of those installments (they can easily range from $50 to $500). These fintech companies also use alternate credit scoring that is done in real-time to allow issuers, merchants, and customers added flexibility. Another benefit that BNPL fintechs offer is a transition from a closed-loop system (being restricted by the bank or merchants who have signed up to said bank) to an open-loop system (the ability for cardholders to make purchases anywhere).
Visa’s BNPL solutions for fintechs
Currently, the company has adopted a two-pronged approach to BNPL solutions. The first solution is Visa Installments, which offers settlement as a service. It’s a network-based BNPL solution that leverages the company’s skill and network through tie-ups with issuers and merchants, allowing Visa Installments to standardize the entire transaction process. The second solution offers acceptance as a service with virtual Visa cards by BNPL providers. The company helps fintechs and issuers convert transactions from a closed to an open loop. It works by offering a card solution where installments can be provided wherever its cards are accepted.
Understanding Visa Installments
Visa Installments is a network-based solution that automatically enables installments on existing and new credentials via single-side integration for issuers. Importantly, it allows any existing point-of-sale terminal supported by the company to offer installments, be it pre-sale, during, or post-sale. It’s a robust platform that works across multiple networks and can be quickly adopted by any merchant accepting Visa payments—all the while offering a seamless BNPL experience for consumers.
Diving deeper into how it works for consumers, if BNPL is selected as their payment option, Visa Installments first checks if they’re eligible for it. This process isn’t a traditional credit check but a form of alternative credit scoring, which recommends payment plans. Afterward, the customer can select which plan suits them best and proceed with their purchase. All of it is done with just a few quick clicks and taps.
Virtual BNPL cards driving universal acceptance
Another way that Visa facilitates BNPL is through acceptance as a service with virtual BNPL cards. To help drive greater acceptance, the company has entered into global partnerships with providers for universal acceptance by offering either virtual or immediate Visa cards on a BNPL line. This system allows customers to select BNPL when making a purchase, issuing them a Visa card that can be tokenized on their phone, extending them a line of credit, and calculating the most appropriate payment plans. Additionally, customers can use any credit left over on their newly issued Visa card at other supported merchants.
Visa’s vision for the future of BNPL
Research has shown that 60% of millennials state they prefer buy now, pay later over credit cards. Moreover, offering BNPL services backed by a bank or a trusted partner like Visa also increases their confidence to invest in such purchases. To make BNPL a more accepted, trusted solution, Visa, through its robust network and innovative solutions, is empowering fintech startups globally to embrace this new phenomenon.