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The way in which ‘buy now, pay later’ (BNPL) fintech companies have transformed layby for the 21st century, particularly how we’ve approached customer data and personalisation, holds lessons for the whole financial services sector.
As the local CEO of Openpay for Australia and New Zealand, I’ve been involved in an innovative disruptor of traditional lending. Unlike more traditional products where you need a more established financial institution — that might use legacy technology to do customer and affordability checks — technology in our industry drives real time answers. It’s also cheaper, and eliminates a lot of inefficiencies.
The recent growth of BNPL is not a coincidence. Financial services customers are ready for innovations.
As outlined in a report by Salesforce and Bain and Company, The Customer Imperative in Financial Services, most consumers prefer digital channel experiences, except for the most complex and emotive interactions (such as resolving a suspected fraud alert). The report also shows that 60% of banking and insurance customers are comfortable with how their data is being used and 65% of customers trust their bank and insurer to protect their data.
Combine all these data points (and a few others I’ll share later), and it’s clear financial services companies are missing something if they aren’t going above and beyond to make digital interactions comprehensive, simple and personalised.
Here are a few lessons from the BNPL industry on how we do that.
A common misconception about BNPL is that we’re issuing credit on credit and essentially pushing people further into debt, but 88% of Openpay’s customers are using debit facilities to repay. We do offer debt instruments, but we’re being used as a positive cash flow management tool – we’re making our customers’ lives easier, and they’re recognising it.
A key principle behind making this connection is transparency. One of the main things people want to know with BNPL is ‘how much does it cost me?’ This can quickly get murky with the number of options out there, from paying monthly fees, paying off installments, having the interest come due at some final point, and so on.
An approach we took to overcome those challenges was to simplify our offering so that only more expensive products and services with longer repayments have fixed monthly fees. But just as important as what we offer is that we make it transparent at the point of sale.
We have a tool designed to help customers make sure they have the necessary cash flow to start and end their transaction well. The customer is then presented with all the options and can clearly see what they’ll be paying each step of the way. There are no hidden fees, and they can budget from the day one of the transaction.
From there we get proactive about our customer profiles. We want to know who our customers are, so we've got great technology that sits behind our business from a CRM perspective, including Salesforce. Their platform allows us to leverage our data to enable proactive communication to our customers about the services they truly need (we delve more into this in lesson three).
During the pandemic, proactive communication was the top reason people became more likely to recommend their bank or financial institution. So it’s a value add for you and your customers.
A unique aspect of the BNPL industry is that we tend to have both a contractual relationship with the merchant and a connection with the end consumer. In a non-traditional finance sense, a lot of companies in the sector actually own the full customer experience.
This verticalized model enables us to be embedded into the core of merchant’s infrastructures. We come up as a payment option at the point of purchase. At the same time, consumers who have an account with us can use that across multiple merchants. This means we are always a seamless part of our users’ purchasing and payment management processes.
I’ll give you an example of how dynamic this allows us to be: if an existing user with us is purchasing a new product from a new merchant, they can actually receive reminders from us, whether that’s about an upcoming payment or anything else. We’re talking to customers where they are, rather than making them find us.
The impact of this is hard to overstate. In 20% to 30% of situations financial services consumers say they are forced to shift channels in order to accomplish what they want. As the report outlines, this is proven to make it significantly less likely that your customers will be your advocates — because they just get so frustrated.
Being a technology business, data is our fuel. We collect and access multiple data points that should be familiar to finance businesses, including:
If someone uses Openpay to service their car, we know they’re likely to need that again in nine to 12 months, and we send timely offers. We know which retailers customers prefer, if they need to pay for vet bills, and much more. Over time this means we develop a fine grained understanding of each customer and can continuously help them meet their lifestyle needs.
You might be wondering whether customers might find this intrusive or worrying, but the opposite is true. In fact, 60% of customers are either interested or very interested in their financial institution providing service experiences that reflect their requirements. They responded similarly when asked if they would be interested in being offered more solutions that are relevant to their needs.
This approach is appreciated by our merchant clients too. Not only can we help them understand their customer base better, but our relationship with customers can be helpful to their marketing with those same customers.
This data isn’t just for sales. We share it across our organisation, it flows from our data experts to marketing, customer service, PR, and so on. Getting an organisational-wide single view of each customer means wherever and however they make contact, the response can be personalised. It’s what they want, so we make sure we remain as relevant as possible.
To find out more about why financial services now have ‘permission to personalise’, and learn the best ways to do it, download The Customer Imperative in Financial Services report.
