Buy Now, Pay Later

Have you done any online shopping recently? If the answer is yes (and it definitely is), you’ve probably noticed the increasing number of retailers offering installation plans, so you can buy now, pay later. Examples of these BNPL apps are Klarna, Afterpay, Affirm, and PayPal.

This virtual layaway plan is incredibly appealing to retailers and consumers alike. For retailers, sales go up when the ability to pay over a period of time is introduced. Boosting revenue is a no brainer to these companies, and partnering with BNPL apps augments profits. Consumers are attracted to BNPL solutions because they function as credit cards without charging interest, the caveat is that you must make your scheduled payment. BNPL plans will charge late fees and delinquency on an account can be sent to collections, which leads to credit reporting. 

Buy Now, Pay Later

As BNPL plans become more widely utilized, more accounts inevitably end up in the collections cycle. Chief Operating Officer Jim Beck shares his predictions. “I think there will be two of three immediate impacts. First, a customer’s true credit score or situation will be obscured for a while as these BNPL loans are not currently reporting. This may lead to bad lending decisions and incorrect prioritization of accounts in the recovery process. Second, I think that this will be a continued push for the industry to move to digital solutions due to the average balance and the fact that so many of these loans originated online.  And lastly, I would expect that we will see an increase in fraud as these loans are different from the traditional lending process. I think that agencies will need to tighten up their self service and traditional fraud and dispute practices to ensure they are handling these accounts appropriately.” 

Because BNPL companies are fairly new and offer an alternative line of credit, the CFPB recently opened an inquiry. At the end of 2021, the CFPB ordered the collection of information regarding the risks and benefits of BNPL loans. 

Beck says, “These loans will eventually be accounted for in a customer’s credit profile, which ultimately will be better for the industry and the customer. I think that this gives a lot of newer borrowers an opportunity to build good credit and issuers a true insight into the customer to make sound decisions. Due to the accessibility of the product I would expect that the CFPB is going to become highly involved in all aspects of the credit lifecycle for BNPL.”

The BNPL plan is, at its heart, a byproduct of the digital world. BNPL companies are modern, immediate, and inventive. Consequently, they want to partner with technologically innovative collections agencies. Additionally, the customer base of a typical BNPL is 75% Gen Z and Millennial. BNPL companies are made by digital natives for digital natives. EVP of Business Development Misty Carson said, “When it comes to the cutting edge of technology, MRS is a cut above. Our technology has been a proven differentiator when partnering with major BNPL companies. The innovation that guides us and the solutions we implement go hand in hand with BNPLs.” 

Not only does MRS match a BNPL company’s technologically driven spirit; we are also committed to offering a myriad of digital solutions so that the consumer may select what platform suits them best. There is no one size fits all. Each consumer has different needs, and our digital tools are tailored to the individual. 

Carson said, “MRS’s digital technology is flexible for customers to self-serve on our secure payment web portal or with our virtual agent Adam at any time of the day or night. We provide solutions that are convenient for customers and compliant with Reg F. And for customers who prefer to speak with an agent, we always offer the option to select a live agent. Our goal is to always provide a positive customer experience.”

The digital landscape is swift and ever changing. In order to keep up, it is imperative to understand the new players and their needs. Everyday, MRS continues forging ahead, innovation and customer experience at the core of all our endeavors.