EXL and Skeps help lenders tackle the buy-now-pay-later market

The Situation: With the concept of deferred payments shapeshifting into a new and more tempting “buy-now-pay-later” financing solution, lenders are eager to include these capabilities in their portfolio to gain a sizable share of early-adopting merchants.

Point-of-sale financing is having a moment, buoyed by the explosive worldwide growth of buy-now-pay-later (BNPL) offerings. The perfect storm of an ongoing pandemic, fintech ingenuity, digital payments, and millennial and Gen Z malaise with credit cards is driving demand and investment sky high. Established payment fintechs like Square and PayPal have made BNPL acquisitions, and major retailers like Amazon have embraced the model through various partnerships worldwide. As our latest Pulse data shows in Exhibit 1, financial services firms are hungry for their piece of the opportunity pie, but those burdened with legacy innards have found it difficult to move quickly to join the BNPL party.

Exhibit 1: Lenders and banks prioritize new markets and experiences

Sample: 67 BFS executives; 533 other sector executives, Global 2000
Source: HFS Pulse 2H, 2021

EXL developed an end-to-end point-of-sale financing solution in partnership with Skeps to address the latest market demand

EXL and Skeps have joined forces to develop a packaged, scalable point-of-sale financing solution with hopes to fulfill lenders’ speed-to-market aspirations. The solution offers end-to-end capabilities spread across five areas: strategy, data connections, origination, servicing, and collections, as Exhibit 2 outlines. It has plug-and-play capability for any module independently, allowing clients to choose which services match their requirements. The solution helps banks and merchants plan and execute their credit strategies and leverages pre-built API connections across multiple data vendors and payment processors to support pre-approvals. The offering supports BNPL, which has been the adoption driver, and longer-term point-of-sale financing options. Leveraging its complete suite of offerings, it also provides digital collections, something HFS has previously discussed. EXL is initially targeting lenders, with lenders then onboarding merchants.

Exhibit 2: EXL’s point-of-sale financing solution is a modularized offering supporting client needs across the lending life cycle

Source: EXL, 2022

One key differentiator for EXL’s point-of-sale financing solution is its ability to support multiple lenders through a one-time integration process. When a retail customer opts for BNPL, they complete a single application form. The solution leverages this single source of information with the customer’s credit history to reach multiple lenders as needed to obtain approval—all using one application and a single credit report pull. This ensures the customer gets the best chance of approval and the best rates while increasing the likelihood of a successful sale for the merchant, driving crucial revenue.

First National Bank of Omaha (FNBO) is already leveraging EXL’s point-of-sale financing solution, and more lenders are coming soon

FNBO has issued co-branded credit cards and unsecured personal loans to millions of customers in the US. But it recognized shifting market demands and decided to launch a BNPL offering. It realized this would be time- and resource-intensive and sought an external partner, landing on EXL. Working with EXL and Skeps, FNBO developed a point-of-sale financing solution for its online and in-store merchant partners, called Slice by FNBO, which launched in Q3 2021. Since then, FNBO has enrolled various merchants that prefer the option of offering a BNPL capability to clients to encourage direct brand stickiness. FNBO expects its merchant roster to grow significantly in the coming year, creating a new revenue opportunity for it and its merchants.

It’s worth noting that EXL believes that it can implement the solution in as few as 8 to 10 weeks for future clients. It will be going live for other select clients in the coming months.

The Bottom Line: Exploring modular, customer-friendly lending solutions is imperative for lenders and banks to compete effectively against fintechs.

While lenders and banks have an extensive catalog of traditional offerings, they must anticipate the growing expectations of new-age customers and understand how to ensure their brand’s stickiness with them. EXL’s point-of-sale financing solution offers a vetted and formalized approach to address the growing needs of lending institutions to speed launch and ride the BNPL wave. However, since the solution is still in its early days, EXL will need to demonstrate that it can be successfully deployed for different lenders with different requirements and technology environments.