Name: Buy now, pay later – today and tomorrow
Uploaded: 2023-10-09T13:06:41.219Z
Duration: 435.08
Description: Akita Somani, Senior Vice President | Buy Now Pay Later/ POS Lending, U.S. Bank, talks about the bad press around BNPL and the responsibility that financial institutions have in protecting customers. She also explores the future of BNPL from a regulatory perspective and from a credit perspective.

Fall.INT.009.mp4

Back

Or filter by your interest

Browse all our content

Finovate

Unlock all the content with only {{price}}

FinovateFall 2023

INT.009 Akita Somani.vtt

English

{{00:00:04}}
Julie Muhn: Hello.

{{00:00:05}}
Thank you for joining us today.

{{00:00:07}}
My name is Julie Muhn.

{{00:00:08}}
I'm Senior Research Analyst with Finovate.

{{00:00:10}}
I am joined by Akita Somani, Senior
Vice President of Buy Now, Pay Later

{{00:00:14}}
and Point of Sale Lending for U.

{{00:00:16}}
S.

{{00:00:16}}
Bank.

{{00:00:17}}
Thanks so much for joining us today.

{{00:00:18}}
Akita Somani: Great to be
here this morning, Julie.

{{00:00:20}}
Julie Muhn: Buy Now, Pay Later
is such a hot topic and has

{{00:00:23}}
been for a few years now.

{{00:00:25}}
Can you give us an overview of the
benefits of Buy Now, Pay Later and

{{00:00:29}}
talk to us about why it's so popular?

{{00:00:31}}
Akita Somani: Sure.

{{00:00:32}}
Buy Now Pay Later comes in several
formats, which allows consumers

{{00:00:36}}
to actually split their purchases
into multiple installments.

{{00:00:40}}
The most popular or well known
form of Buy Now Pay Later in the

{{00:00:44}}
current environment is Pay in 4.

{{00:00:46}}
But there are so many more
additional options on that product

{{00:00:50}}
that are available to consumers.

{{00:00:52}}
And effectively, it offers them
one: another payment option.

{{00:00:56}}
Today, consumers could pay using
their credit or debit card or

{{00:00:59}}
potentially even using a bank transfer.

{{00:01:02}}
And this provides another
unique payment option to them.

{{00:01:05}}
The experience that exists in the
market today is so slick, which

{{00:01:08}}
means consumers can get through the
experience really easily without

{{00:01:12}}
needing to fill out five pages of paper.

{{00:01:14}}
And also, it gives them
flexibility, right?

{{00:01:17}}
Instead of putting this large purchase
on their credit card and trying to manage

{{00:01:21}}
their finances, they now have this easy
slick alternative offered at the point of

{{00:01:27}}
purchase to be able to determine how they
would want to repay for their product over

{{00:01:33}}
a longer period of time at terms that are
usually quite attractive and affordable.

{{00:01:38}}
Julie Muhn: Yeah.

{{00:01:39}}
Great.

{{00:01:40}}
And how widespread do you think
it's been growing, how widespread

{{00:01:43}}
do you think it'll become?

{{00:01:44}}
Akita Somani: So the more common forms
of buy now pay later that are heard

{{00:01:49}}
of today related to that paying for
option around retail and e- commerce,

{{00:01:54}}
but actually this option exists in
multiple segments like home improvement

{{00:01:59}}
as well as automotive and others.

{{00:02:03}}
Healthcare as an example, right?

{{00:02:05}}
So depending on how the option is
constructed, bearing in mind consumer

{{00:02:11}}
interests and the business interests
that are actually offering them,

{{00:02:16}}
this product definitely has a lot of
opportunity to grow and proliferate.

{{00:02:20}}
And being done in the right way, it would
also mean that it steers away from some

{{00:02:25}}
of the concerns around debt stacking and
also lack of transparency to consumers.

{{00:02:31}}
Julie Muhn: Yeah, great.

{{00:02:32}}
So about a year ago or so, there was
a lot of bad press going out about buy

{{00:02:37}}
now, pay later that it's a debt trap
and consumers don't quite understand it.

{{00:02:42}}
How can financial institutions
protect their end consumers and

{{00:02:46}}
prevent that spiral of debt?

{{00:02:48}}
Akita Somani: Yeah, part of the
reason why there was so much bad press

{{00:02:52}}
and this was really in the news for
the wrong reasons is because it was

{{00:02:56}}
associated with that pay in for avatar
of the product, which is predominantly

{{00:03:02}}
linked to impulse purchases, right?

{{00:03:05}}
Think about a person shopping on a
site and gets really inclined to buy

{{00:03:10}}
that $500 dress for a special occasion.

{{00:03:14}}
And they get this easy option of
converting into four installments

{{00:03:18}}
and Hey, I'm going to get this
dress for this cool occasion and I'm

{{00:03:21}}
going to split into installments.

{{00:03:23}}
The other one is there's a
trending sneaker going around.

{{00:03:26}}
I want to go spend the $300
and split in installments.

{{00:03:30}}
Now, the challenge with that is that
when it's an impulse purchase and in

{{00:03:34}}
today's environment where interest rates
have gone up significantly, credit and

{{00:03:38}}
access to credit is really challenged.

{{00:03:41}}
Consumers keep accumulating these
installment payments for a variety of

{{00:03:48}}
these impulse purchases knowing that
a lot of these loans would not have

{{00:03:52}}
impacted their credit score because
historically only soft credit would

{{00:03:57}}
have been done on these products.

{{00:03:59}}
And that collectively constitutes a
potential concern for consumers taking

{{00:04:05}}
on more debt that they can afford and
being able to repay them, especially

{{00:04:10}}
in the current environment where
inflation and interest rates are so

{{00:04:13}}
high that it's difficult for consumers
to manage their finances anyway.

{{00:04:17}}
Financial institutions can definitely
navigate better around this because

{{00:04:21}}
they've had decades of experience around
consumer lending and doing things in a

{{00:04:26}}
compliant and regulatory friendly way
and ensuring that they are disclosing

{{00:04:32}}
all of these terms and the benefits
and potential pitfalls to consumers

{{00:04:37}}
spending time educating them beforehand.

{{00:04:39}}
Julie Muhn: Yeah.

{{00:04:40}}
Yeah.

{{00:04:40}}
So you mentioned regulators.

{{00:04:42}}
Can you talk to us a little bit about
like regulatory concerns that consumers

{{00:04:47}}
or banks may have in the future around
by now pay labor later products?

{{00:04:52}}
Akita Somani: There are
about three key elements.

{{00:04:53}}
If I were to summarize, one would
be around transparency to consumers

{{00:04:57}}
saying if they missed a payment, what
late fees would they be subject to?

{{00:05:02}}
In the future, when these loans do
start getting reported to bureaus,

{{00:05:06}}
it could potentially impact their
credit score if they were late on a

{{00:05:09}}
payment and or completely defaulted
on a buy now, pay later product.

{{00:05:14}}
The second aspect we've spoken
about this is debt stacking, right?

{{00:05:17}}
The ability for consumers to take on
more debt than they can afford because

{{00:05:22}}
of the fact that they've used this
as an alternative to traditional debt

{{00:05:25}}
instruments like a credit card or a home
equity line or a personal loan, which

{{00:05:29}}
has more stringent regulation around it.

{{00:05:31}}
And then finally, it's about a lot of
the players in this space have been

{{00:05:36}}
fintechs and or similar providers and
their ability to take consumer data and

{{00:05:42}}
monetize it to market other products
and services and therefore increasing

{{00:05:46}}
the profitability of that consumer and
or that small business, concerns...

{{00:05:51}}
Leads to some concerns around
how consumer data could be

{{00:05:54}}
used without their permission.

{{00:05:56}}
Julie Muhn: Oh, yeah.

{{00:05:56}}
Yes.

{{00:05:57}}
All right.

{{00:05:58}}
Yeah, that's, yeah,
always a concern there.

{{00:06:00}}
And that transparency is certainly key.

{{00:06:02}}
So to wrap us up here, let's
talk, let's look to the future.

{{00:06:05}}
How do you see buy now pay later
transforming the future of credit?

{{00:06:10}}
Akita Somani: So I think the first thing
is it's going to expand to many more

{{00:06:14}}
segments and verticals than is offered
in today, and the experience will

{{00:06:19}}
become equally consistent and simple
for consumers to access as well as for

{{00:06:24}}
businesses to offer it to their customers.

{{00:06:27}}
And then finally because of the
intervention and interest from

{{00:06:32}}
regulators and other players and
the current environment that we are

{{00:06:37}}
in, whereby fintechs have to more.

{{00:06:39}}
Consciously manage their growth and
the growth of their loan portfolio.

{{00:06:43}}
This product will take a more consensuous
approach to how they actually engage

{{00:06:49}}
with a certain segment of consumers
and certain segment of businesses in a

{{00:06:53}}
much more controlled and compliant way.

{{00:06:56}}
Julie Muhn: Yeah, great.

{{00:06:57}}
Which sounds like it'll ultimately
benefit the end consumer there.

{{00:07:01}}
Wonderful.

{{00:07:02}}
Well, thank you so much for joining
us, this has been Akita Somani.

{{00:07:05}}
I'm Julie Muhn.

{{00:07:06}}
Thanks.

I'm Senior Research Analyst with Finovate.

I am joined by Akita Somani, Senior
Vice President of Buy Now, Pay Later

Akita Somani: Great to be
here this morning, Julie.

Julie Muhn: Buy Now, Pay Later
is such a hot topic and has

Can you give us an overview of the
benefits of Buy Now, Pay Later and

Buy Now Pay Later comes in several
formats, which allows consumers

to actually split their purchases
into multiple installments.

The most popular or well known
form of Buy Now Pay Later in the

But there are so many more
additional options on that product

And effectively, it offers them
one: another payment option.

Today, consumers could pay using
their credit or debit card or

And this provides another
unique payment option to them.

The experience that exists in the
market today is so slick, which

means consumers can get through the
experience really easily without

And also, it gives them
flexibility, right?

Instead of putting this large purchase
on their credit card and trying to manage

their finances, they now have this easy
slick alternative offered at the point of

purchase to be able to determine how they
would want to repay for their product over

a longer period of time at terms that are
usually quite attractive and affordable.

And how widespread do you think
it's been growing, how widespread

Akita Somani: So the more common forms
of buy now pay later that are heard

of today related to that paying for
option around retail and e- commerce,

but actually this option exists in
multiple segments like home improvement

So depending on how the option is
constructed, bearing in mind consumer

interests and the business interests
that are actually offering them,

this product definitely has a lot of
opportunity to grow and proliferate.

And being done in the right way, it would
also mean that it steers away from some

of the concerns around debt stacking and
also lack of transparency to consumers.

So about a year ago or so, there was
a lot of bad press going out about buy

now, pay later that it's a debt trap
and consumers don't quite understand it.

How can financial institutions
protect their end consumers and

Akita Somani: Yeah, part of the
reason why there was so much bad press

and this was really in the news for
the wrong reasons is because it was

associated with that pay in for avatar
of the product, which is predominantly

Think about a person shopping on a
site and gets really inclined to buy

And they get this easy option of
converting into four installments

and Hey, I'm going to get this
dress for this cool occasion and I'm

The other one is there's a
trending sneaker going around.

I want to go spend the $300
and split in installments.

Now, the challenge with that is that
when it's an impulse purchase and in

today's environment where interest rates
have gone up significantly, credit and

Consumers keep accumulating these
installment payments for a variety of

these impulse purchases knowing that
a lot of these loans would not have

impacted their credit score because
historically only soft credit would

And that collectively constitutes a
potential concern for consumers taking

on more debt that they can afford and
being able to repay them, especially

in the current environment where
inflation and interest rates are so

high that it's difficult for consumers
to manage their finances anyway.

Financial institutions can definitely
navigate better around this because

they've had decades of experience around
consumer lending and doing things in a

compliant and regulatory friendly way
and ensuring that they are disclosing

all of these terms and the benefits
and potential pitfalls to consumers

Can you talk to us a little bit about
like regulatory concerns that consumers

or banks may have in the future around
by now pay labor later products?

Akita Somani: There are
about three key elements.

If I were to summarize, one would
be around transparency to consumers

saying if they missed a payment, what
late fees would they be subject to?

In the future, when these loans do
start getting reported to bureaus,

it could potentially impact their
credit score if they were late on a

payment and or completely defaulted
on a buy now, pay later product.

The second aspect we've spoken
about this is debt stacking, right?

The ability for consumers to take on
more debt than they can afford because

of the fact that they've used this
as an alternative to traditional debt

instruments like a credit card or a home
equity line or a personal loan, which

And then finally, it's about a lot of
the players in this space have been

fintechs and or similar providers and
their ability to take consumer data and

monetize it to market other products
and services and therefore increasing

the profitability of that consumer and
or that small business, concerns...

Leads to some concerns around
how consumer data could be

FinovateFall

Expert Insight

Explainer

Akita Somani, Senior Vice President | Buy Now Pay Later/ POS Lending, U.S. Bank, talks about the bad press around BNPL and the responsibility that financial institutions have in protecting customers. She also explores the future of BNPL from a regulatory perspective and from a credit perspective.