Last post, we discussed how consumers want more flexible financing options and why BNPL is growing in popularity. Yet more flexibility doesn’t necessarily translate to less credit risk, and therefore BNPL players should adopt a more future-focused view of the consumer. In our last post of this series, we’re going to focus on flexibility on the business side.

Before the pandemic, we had partnered with Harvard Business Review Analytic Services to survey senior leaders to identify use cases for and implementation challenges with AI. Our research found that operational decisions are an overlooked area and missed opportunity. Jim Marous, Co-Publisher of The Financial Brand, reiterated this insight in a joint webinar on creating agility in consumer finance and lending arguing that “digital transformation cannot occur without rethinking of the back-office processes” including how to streamline operations and integrate new data sources. 

A recent McKinsey article* discusses four key elements of a successful credit solution: data for model development, model decision engine, infrastructure, and model monitoring/maintenance. The common thread across these elements is the flexibility to handle “significant disruptions.” In other words, being fast, whether that mean speed to market or delivering an automated approval process, doesn’t guarantee success in the marketplace.

Are BNPL players ready to adapt to future disruptions like new regulations? Here are a few areas to consider when developing a flexible BNPL program:

  • 3rd-Party Data: Does your infrastructure support the capability to quickly ingest, integrate, and make decisions on varying data sources? 
  • Model Deployment: Does your infrastructure support the capability to quickly deploy credit and other risk models and support advanced analytic techniques like machine learning? 
  • Decisioning: Does your infrastructure support the capability to allow for quick modifications and continuous testing of rules?

As we have seen with the pandemic, disruptions can come from anywhere. For example, one of our healthcare services clients was facing a significant price increase for one of the data sources they were using in patient credit risk assessment. Cutting costs was crucial as COVID-19 led to reduced and delayed patient appointments. We were able to work with them to quickly test alternative data sources, modify their credit scorecard, and go to production in a matter of weeks.

Learn how we can help you create flexibility in your BNPL program.
Contact us today to get started.

 

*Source: https://www.mckinsey.com/business-functions/risk-and-resilience/our-insights/the-coming-opportunity-in-consumer-lending