It is not new for consumers to shop for relatively high-cost goods and services such as jewelry, electronic items, vehicles, homes, etc. in Equated Monthly Instalment (EMI). While organized financing has been both available and widespread for vehicles, homes the shopping of jewelry, electronic items have been done predominantly either through down payments or through installment options offered by credit card companies. Thus, a significant portion of the consumers who do not have a card facility is excluded from the financing option.
It is important to note that credit cards were not originally meant for installment purchases. Their original purpose was to provide emergency credit up to a limit to those in urgent financial need. Credit cards were then tailored to accommodate installment payments as the need arose. Credit card options are quite expensive. Besides until the total transaction fee is paid out, the limit on the card is reduced by the transaction amount depriving the cardholder of its real purpose which is emergency credit.
It is now common for merchants to tie up with finance providers to make easy financing schemes available to consumers. The financers verify the KYC details of the consumer and make finance available for the purchase. The finance may be available instantly or in a few days depending on the specific case. However, the challenge here is that the entire process is manual and hence time and cost-intensive. Besides the consumer has only a limited number of financing options introduced by the merchant. Both the merchant and the financer may lose many customers owing to delays in approval and lack of options.
This scenario is about to change through the ecosystem automation of the Buy Now Pay Later option. Imagine shopping online and when you are about to pay, you get 5 to 10 financing options from different financing companies to buy the product now and pay for the purchase in installments with corresponding eligibility requirements and terms clearly listed, so you can choose one and proceed to complete the payment instantly.
While pre-approved financing exists for limited value purchases, high-value purchases may require additional process steps such as video KYC, sharing of financial statements digitally, resulting in near real-time approval of finance. In short, the entire shopping experience will be automated, digital, and instant or near-instant. The same or similar experience could be made available to walk-in customers as the merchants, technology providers, and finance companies participate in the ecosystem.
It is not hard to imagine that such an option to consumers requires the merchant, the financing company, their banker, and the technology provider to come together. An important aspect of this ecosystem is to achieve ease of setting up the confirmation of recursive payments called electronic mandates or E-Mandates and ensuring that the payments are received by the financer on the due date.
Setting up E-Mandates must be simple and instant so that the shopping experience is kept comfortable. Besides the finance provider needs to be sure that the E-Mandate is set up successfully 100% of the time so that they can eliminate NPAs. Hence the technology platform that aggregates the ecosystem must ensure smooth and guaranteed setting up of E-Mandates.
A technology platform that integrates video KYC, Finance provider API interface, merchant API interface, Banker API interface, default collection process and enables a user-friendly experience across devices is essential for the successful implementation of the Buy-Now-Pay-Later option for consumers. However, such an implementation brings benefits to all the participants. The consumer gets financially empowered, the merchant finds growth in business, the finance provider sources more customers with almost zero extra cost, banks see growth in float and payments fee.
Paycorp.io is one such company that provides the Buy-Now-Pay-Later option in an integrated technology platform. Paycorp.io aggregates merchants, multiple finance providers, banks in their technology infrastructure and offers a very smooth experience of listing finance options, automated KYC verification, E-Mandate setup, and payments initiation. Finance providers receive financing requests in their Loan Origination system automatically which they can approve online. Financers also receive instant updates on E-Mandate setup, payment collections.