Buy Now, Pay Later Business 👜

The Nigerian fintech space and the industry at large are increasingly looking for ways to serve customers better, and this insatiable need for customer satisfaction has resulted in a significant increase in the adoption of the Buy Now, Pay Later Business model, otherwise known as BNPL, in major aspects of the consumer economy.

What is BNPL?

Buy Now, Pay Later (BNPL) is a short-term financing model that allows consumers to make purchases and pay for them at a later date, often interest-free. They can also be referred to as “point-of-sale installment loans”. BNPL options are becoming increasingly popular, especially when shopping online and this is just the kind of convenience consumers are looking for.

The growth and market value of the players in this sector of the financial market have been massive over the last few years, and also because of the pandemic outbreak of 2020, more consumers have adopted the BNPL model of purchase, thereby leading to more companies, organizations, or individuals building BNPL products and services to compete in this ever-growing market.

But that’s all on the surface, building products and services that thrive on this business model require some level of business and technical expertise, especially because it deals with credit services and is also built around trust. By offering BNPL services, conversion rates, basket sizes, and customer satisfaction can be increased.

Therefore in this use case, we hope to break down all that is required for you as an individual or business organization to build and scale BNPL products and services on our inclusive core banking platform, Woodcore.

Business Proposition

FountainTech is a company providing payment solutions to third-party consumers and organizations. They currently have a need to provide credit facilities for their customers, i.e., render a service that allows customers to purchase some products and finance them on an installment basis given that the consumer has a good credit history.

Here’s how FountainTech built their BNPL product on Woodcore!

The Solution

The first point of entry into this project was understanding the market FountainTech wanted to serve and this informed their decision of building a cross-platform BNPL product that could run on mobile devices and a personal computers. Behind the beautiful UI, they needed their product to do the following:

• Provide products for personalized consumer experiences.
• Onboard new customers and create a Customer Information File (CIF).
• Create a Loan account for customers and assign specific privileges tailored to credit services.
• Manage their deposit accounts (Wallets).
• Manage recollection and repayments of loans.
• Simplify open banking compliance.

Provide Products for Personalized Consumer Experiences

The business model of FountainTech’s BNPL product revolves around the creation of a loan account for a customer that would serve as a wallet to service the BNPL option. This loan account is then linked to the customer’s savings account for repayment and recollection.

With Woodcore, the following core banking products were available to be built upon:

• Deposit Products

Deposit products can be created as templates for creating client savings and current accounts on Woodcore. This is core functionality for digital financial products. All we need to do is define the configuration for each savings product including rules, default settings, and constraints, which will later be used as guides for creating various types of savings accounts.

• Loan Products

These products can be used to manage the entire loan management process within a BNPL product. This is the most important aspect of the BNPL product lifecycle. These products deal with the configuration of credit facilities and customization for customers.

Loan products can be for several months depending on the configuration of the customer e.g., 6 months, 12 months, 24 months, and so on.

Onboarding on WoodCore

The yardstick for the duration in onboarding depends on the number of customer accounts to be migrated from the previous core banking application to Woodcore along with the technical aspect of the BNPL product being handled by the team’s product management team.

A customer onboarding process on FountainTech would go through the following steps:

1. An account creation API request is made from FountainTech’s portal to Woodcore.

2. This process creates a customer information file, which is very important in the process of recollection of loans from customers, and a deposit account, attaching a Nigerian Uniform Banking Account Number [NUBAN] for the customer.

3. A loan account is created simultaneously with the deposit account which is used for the management of funds and issuance of BNPL services.

4. An SMS alert notifying the customer of the newly created account via Termii and also for deposits, withdrawals, and also credit issuance alerts.

Accounts Management

Managing financial accounts and services is considered the day-to-day responsibility of any digital financial service offering such as FountainTech. With Woodcore, FountainTech was able to manage their customer accounts and information by going through the processes listed in Onboarding on WoodCore above, and thereafter on the Woodcore CBA.

The Loan products were configured on the console and were used to create loan accounts to manage the BNPL process and suit the customer's needs.

Configuration & Repayment of Loans

Loan products are configured on Woodcore via the console and for a BNPL offering, if a down payment is made on a product or service, the interest would be calculated on the outstanding balance of the loan, therefore, the interest rates can be configured to vary according to a selected type of service or the percentage of principal that remains unserviced.

The lifecycle of funds in FountainTech’s BNPL service, i.e., loan issuance, repayments, and recollection, is a critical part of operation for a successful BNPL service delivery. For customers on the platform to repay a loan, an API request is made to Woodcore from the customer’s savings account linked to the loan account.

The requests are validated and if all the request parameters are correct and valid, a successful repayment are initiated for the customer. In addition, to protect businesses such as FountainTech in its BNPL operations, Woodcore ensures a Customer Information File (CIF) is provided as stated earlier when new customers onboard on a platform. This CIF would contain the BVN, NIN, and other important details of the customer so defaulting customers can be reported to the accurate authorities.

Summary

BNPL products enable customers to manage their cash flow over a period of time, for purchases big or small. Using Woodcore, you can build and manage your BNPL product offering from start to finish all through our Loan Products API and also with the use of Woodcore’s CBA.
This use case covers the preliminary and important aspects of starting and building a BNPL product infrastructure on Woodcore. Speaking with our technical team would further clarify any further questions you may have.