Fairer and more flexible credit – the underlying premise for Buy Now Pay Later (BNPL), which includes financing options from small consumer purchases to significant business expenses. What opportunity do these solutions offer, and how are companies and people using BNPL services to thrive?
First, let’s consider access to financial services and what opportunities it affords the unbanked. The World Bank believes digital financial inclusion to be a pathway out of poverty and moving people toward an innovative, invigorated, interconnected, and inclusive world economy. We know that financial innovation and technology transcends traditional infrastructure, Chinoda and Kwenda (2019) show in their research that mobile phone innovation improved financial inclusion in 49 countries. The study also finds that financial inclusion thrives off competition in the marketplace, bank stability, and economic growth – meaning inclusion is integral for the effective operation of financial services and running of the economy.
In this way, we see then the step toward financing for upliftment and significant socio-economic reform. From here, it’s easy to transfer the outlook to the consumer – who, in stark contrast to the unbanked, may use BNPL for expensive consumer electronics instead of connecting running water and electricity to their home.
The consumer can split their new smart tv payment, or a large panic buy visit at a grocer, into three equal instalments without interest; how then do companies use BNPL, or “a subscription lifestyle” to thrive? Capchase recently closed a $280 million raise in debt and equity financing to support the launch of a new BNPL product. This product allows founders to access non-dilutive capital for expense financing; like cloud hosting, payroll, recruitment fees, legal bills – without depleting their cash reserves.
Miguel Fernandez, CEO, Capchase, says: “Managing large expenses and having to make difficult decisions over how they spend their cash is one of the most consistent and trying issues that our clients face.”
Founders and CFO’s spend more than half their time on cumbersome tasks piecing together the disconnected payment systems – shares Mariano Dima, president at Soldo, an expense management platform used by Mercedez Benz and Gymshark.
In a study of CFOs and finance directors, Soldo revealed weak spending controls are costing European businesses 2% of their annual turnover through the pandemic.
BNPL deserves the hype. It affords opportunities from the grassroots level of inclusion – to the startup scene where time is of the essence – and refining established businesses so they can focus on innovation instead of paperwork.
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