AI and Super Apps to BNPL : How fintech can help the cost-of-living crisis

By Anna Porra, European Strategy Director at Marqeta


As the cost-of-living continues to increase, financial wellbeing is becoming a more pressing concern for many consumers. But not all financial services offerings are designed with a consumer’s best interests in mind. Measures that allow for irresponsible lending and impose costly overdrafts or interest fees have, in the past, driven some cash-strapped consumers further and further into debt.

But the tides are turning, and many elements of the financial services industry are showing a genuine commitment to better supporting consumers in improving their financial health. The rise of Buy Now, Pay Later (BNPL) is a great example of this, offering consumers more lending options on goods and flexibility with repayment.

The financial services industry has much to offer those suffering from the cost-of-living crisis and is starting to take innovation increasingly seriously to better serve today’s consumers.


From dumb cards to smart cards

A lot of the innovation has already been driven by some tech-savvy challenger banks, who rightly identified that consumers may want more support in helping them to save and spend in a smarter way – popularising rounding-up features, pre-set spend controls and real-time notifications.

In the future, we may see such features become more widely available, but with a greater focus on personalisation. By understanding consumers, their behaviours and buyer journeys, banks may be able to offer more personalised and welcomed advice.

Control and visibility are key here. We might expect to see more fintechs move away from dumb cards to smart cards that know where money is being spent and can help to make real-time, risk-based recommendations and protect against unwise spending. The automation of digital payments through an AI smart wallet will potentially become more common. This will give consumers the control to set certain financial goals and then the smart wallet will help them reach those goals through automated controls.

Such controls may go beyond financial well-being. For example, micro-investing is helping consumers to save by “rounding up” payments to the nearest pound. We may also see wallets become increasingly personalised, adapting to a user’s risk appetite, ethical views and financial objectives.


Buy Now, Pay Later is changing the lending game

We are also starting to see the impact that Buy Now, Pay Later (BNPL) can have on financial wellbeing. Buy Now, Pay Later firms have helped make the lending space more accessible and convenient, enabling finance to be embedded into buyer journeys and helping consumers better manage their finances. The popularity of such services is enabling BNPL companies access to very rich data on customers, data that may help them to offer more targeted services that really make a difference for customers.

But being a BNPL company is often not the end game. BNPL provides companies with an in-depth understanding of certain consumer habits, spending and affordability – offering a smart jumping off point that may help them pivot into other banking services.

Take Zilch, for example, who has a BNPL programme that is connected to a card so you can decide at PoS whether to pay in instalments or with your own balance. Many of these players are already licensed banks, so it likely won’t be long until they disrupt the market further with smooth and personalised credit and banking offerings.

This diversification may also spread across different areas of lending. Already we are seeing BNPL break out of retail into other areas of spending, including larger expenditures such as vehicle repairs[1].

In industries like automotive – where financing with paper forms and sky-high APRs are common – BNPL may offer a more affordable and customer-friendly alternative. We’re seeing that there is appetite from consumers for BNPL to be extended to larger items as Marqeta’s own research found that 63% of consumers surveyed would be keen to see BNPL extended to one off purchases such as white goods.

As the products that offer BNPL options become more extensive and diverse, small businesses may consider using it as an option too, taking out relatively small business loans and repaying over instalments.

Surveyed consumers are also open to shaking-up the lending industry further with many interested in crypto, NFT and gaming loans according to our research. While these technologies are in their relative infancy, it demonstrates that lenders may be lagging behind consumer wants and needs. Ultimately, many consumers want things to be as simple as possible. Those consumers want everything in one place. While much has been spoken about having multiple fintech partners, the reality is many consumers want simplicity and to not to have to set up multiple accounts.

Many serious embedded finance players understand that it is about working to break the link between individual products – like BNPL – to building a one-stop-shop that allows them to own the customer relationship across multiple touchpoints through a ‘Super App’.  Within this app, there is the possibility for everything to be linked into one view giving banks and customers a much clearer picture of financial health and affordability.


 No one left behind

There is clearly an appetite from many consumers for innovation in financial services, and this is a great opportunity for companies to step up and modernise. But, alongside innovation consumers may benefit from greater financial education and inclusion.

Too many consumers still don’t understand the lending process or what their options are, and this may often lead to more debt. Financial organisations will benefit from cutting back on the jargon when speaking to customers, and communicate in a clear and precise way, otherwise a knowledge gap may prevail. Similarly, the impetus to provide consumers education on relatively new products, such as BNPL, should lie with financial organisations. Financial services need to ensure in this time of need that they’re not only offering more personalised and diverse services, but that they’re properly educating consumers on how different options can help them to save money.




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