As giants of the financial world line up to take advantage of the Buy Now Pay Later phenomenon, Deutsche Bank is the latest to join the party. In an unsurprising partnership with a FinTech company, the German giant will be rolling out a pilot project this year. So what does this mean for merchants, consumers and the sector as a whole?
Merchants paid immediately
While DB highlights the fact that merchants are paid immediately on the sale, this is not new for the sector. What is slightly different is the fact the Buy Now Pay Later service is a white label solution. This means merchants can brand this service as their own while Deutsche Bank operates it.
In collaboration with FinTech company Credi2, Deutsche Bank will offer invoice and instalment purchase solutions. How the service is structured means, it can be integrated into any payment system.
Does this encourage customer loyalty?
There is always apprehension when you log onto a website and are then redirected to the services of another. This is no different with the Buy Now Pay Later app market, where leading Buy Now Pay Later apps tend to be front and centre of current marketing. The problem of apprehension is not a significant issue with well-known Buy Now Pay Later companies but can cause issues with some of the less prominent operators.
Consequently, logging onto a retailer’s website indicates a degree of trust. In addition, if the retailer is offering a Buy Now Pay Later app service under their brand name, this should help customer retention.
Who carries the financial risk?
The Deutsche Bank Buy Now Pay Later service allows merchants access to a portal to monitor returns and partial payments, which suggests this risk is transferred to the merchant. Most modern-day Buy Now Pay Later apps take on this risk in exchange for payments from the merchant. However, amidst the marketing literature, Deutsche Bank also suggests that it takes the Buy Now Pay Later risk on its portfolio. A little confusing!
Invoice and instalment purchases
The German system is very different to that in the UK. Invoice purchasing is one of the top three payment methods in terms of transaction numbers. It was, therefore, no surprise to see Deutsche Bank introducing this service with the new white label Buy Now Pay Later offering. If this pilot scheme is successful, this will likely see the rollout of more white label services in different countries. These are fast-changing and very interesting times for the Buy Now Pay Later market.
Will the financial giants take over the Buy Now Pay Later market?
Historically, when new products and services arrive, they are left to fester or grow before the big players seek to take over. We have seen this with cryptocurrencies and electronic cigarettes, to name but two instances. However, the situation could be different regarding Buy Now Pay Later. Many new Buy Now Pay Later apps are unhindered by cumbersome legacy business costs associated with banking. Consequently, the new Buy Now Pay Later app providers are more flexible and fast-moving. They also have a very different mindset to their traditional financial counterparts. So, while the financial giants will no doubt attempt to take over the market, this is highly unlikely.
Conclusion
Undoubtedly, the Deutsche Bank Buy Now Pay Later deal will be the first of many rolled out by the financial giant. Other mainstream banks are also following suit in a market which is fast becoming very crowded and competitive. Eventually, the weaker companies will fall by the wayside, and mergers and acquisitions will lead to consolidation. Resulting in a likely very different shape to the one we see today. However, akin to the electronic cigarette market, it is unlikely that consumers will have as much trust in the traditional financial giants as they do with the Buy Now Pay Later app new kids on the block.
