Switch on gamification
Aside from conventional methods of recourse, banks could employ gamification in the form of credit comparison tools and in-app rewards to encourage better money management. This can help customers reduce debt and begin to improve credit ratings, which in turn can provide access to appropriate credit products, potentially including BNPL.
With the rising prominence of neobanks like Revolut and Monzo, engaging gamification is a logical next step in helping consumers understand their finances better. Not only would this engage younger consumers, typically digital-native and more averse to traditional credit, but it would increase financial literacy and improve financial health across the board. Striking a balance can ensure that apps remain fun and engaging without undermining the provider's authority.
BNPL providers, such as Klarna and Clearpay, will remain an ubiquitous presence at the checkout page, from online shopping sites to food delivery apps. Short-term lending like BNPL has exposed consumers to quick and easy credit by removing the barrier of upfront payments and offering instant gratification. Consumers may find BNPL schemes particularly appealing as they tackle rising costs of living, but there is no doubt that it increases individual risk as they borrow beyond their means without sufficient financial advice and regulation.
The article first appeared in FinTech magazine. It was authored by Melba Montague, Head of Banking and Capital Markets for Genpact.