How to run a BNPL program with a smaller team

Shamolie Oberoi   /    Content Marketing Specialist    /    2022-01-20


Embedding Buy Now, Pay Later is one of the most effective ways for both B2B and B2C companies to boost their average order values and ensure customer stickiness. At the same time, the pace of BNPL adoption also clarifies that offering BNPL is no longer a choice but a necessity.  Current projections predict that the number of BNPL users in India will skyrocket to up to 100 million by 2026, as compared to 10-15 million now.

Clearly, for those who haven’t yet, the time to jump on the BNPL bandwagon is now. But here’s the thing. Building your own lending product in-house is a time and resource intensive endeavour. It involves several processes such as raising debt capital, acquiring licenses, and building underwriting models, to name a few. Plus, it takes millions of dollars in capital and teams spanning 50+ people across development, risk, collections and operations to get a product off the ground.

And the truth is, not all companies are Amazons (even though Amazon US too recently gave up on its global credit product and partnered with a BNPL provider Affirm) and Shopifys. Most businesses don’t have the resources or the time to build an offering like this from the ground up, or pay a partner exorbitant amounts to get it done. But that doesn’t mean smaller, fast-growth companies are doomed to fall behind.

With a plethora of BNPL players in the market, there’s something for everyone. The trick for smaller teams is to zero in on their business and product proposition, and find the right partners who can enable it with them quickly and at lower costs.

How to successfully run a BNPL offering with a small team

Prefer easy integration and scaling to customization

BNPL as a payment method is usually applicable to purchases below INR 1 lakh with average BNPL ticket size ranging from Rs 500 to Rs 5,000, which means these are essentially small ticket size loans. To generate a significant revenue stream, the BNPL offering needs to achieve massive scale - which means that at some point after the initial go-live, you’ll have to ramp up operations in order to make money out of it.

This would involve a team of developers, engineers, risk analysts and the like - resources you may not be able to gather in time. So it’s essential to partner with a provider whose support doesn’t end after the initial integration. They must have a plan through which they can scale and update the credit offerings without additional resources from your end. 

The scale-up might mean a lot more integrations than earlier - payment gateways, more providers, capital partners and so on. Hence, it’s vital to choose a partner that doesn’t necessarily sell the most expensive or customizable product but rather to go with providers that have the best integration and scaling capability and track record. 

When it comes to capital, less is not more

Aside from the obvious - quick, seamless integration within your checkout process and a smooth one-click experience for your end-customer - it would be wise to work with a provider that collaborates with multiple lenders. Having access to a network of lenders would mean that you can serve a diverse customer base through a single integration. As a result, higher numbers of end-users are approved and at relatively better interest rates. 

Business fit with lender preferences

Some platforms or lenders  will have certain pricing limits on each BNPL transaction or bar for goods that will be eligible for a BNPL scheme. Consider the products your business sells and check whether they will be covered.

Cost structure for a BNPL stack

Small teams certainly cannot afford huge recurring outgoes in terms of infrastructure or operations costs. Hence, it’s prudent for business leaders to get a detailed breakdown of associated costs and negotiate with the providers based on their needs. For instance, a newly launched e-commerce store may not need multiple banking integrations or more than a couple of lakh API calls a month. 

It’s best for smaller teams and companies to go with a BNPL provider that offers a la carte approach to a BNPL stack and hence, can be transparently scaled as the business grows. 

Here’s what to steer clear of

BNPL infrastructure includes a number of underlying processes - at the very least, KYC, onboarding, loan offer creation, loan agreement signing, underwriting, and collections. Purchasing each piece of this infrastructure from a different provider will be both capital and resource heavy. Instead, an optimal BNPL provider should offer complete BNPL lifecycle automation so the need for resources - both human and monetary - on the client side is minimized.

Secondly, don’t underestimate the importance of risk management. At its very essence, BNPL is a loan - and weak risk assessment on behalf of associated lenders could lead to your business falling prey to fraudsters and losing money. Ensure that the provider you choose is backed by a reputable lender and is equipped with a strong data platform and credit risk controls. The risk engine should be built on a wide range of parameters that accounts for data such as cash flows, bill repayments, and device data where applicable, in order to approve more users without taking on additional risk. 

Take for example, the FinBox risk engine that is backed by artificial intelligence and machine learning models that evaluates more than 5000+ predictors to generate an underwriting decision.It helps approve 2X more borrowers through risk-based pricing and dynamic offer customization without negatively affecting your portfolio quality. 

In conclusion 

With the biggest brands in the world already offering BNPL, smaller companies have no time to waste. It’s the key to staying relevant in these times of instant gratification - and partnering with the right provider - who does the heavy lifting for you, is the best way to launch your BNPL product. 

With FinBox, you get the entire credit stack - from risk assessment to collections - on one low code platform that facilitates easy and superfast go-live with your very own BNPL offering!

For more information or a demo, you can get in touch with us here.