The future of Buy Now Pay Later: International, multi-channel and fully integrated

Picture11111 - Global Banking | FinanceBy Luigi Pace, Central Director of Marketing and Innovation at Compass, the Mediobanca Group’s consumer credit arm discusses the bank’s recent acquisitions in the BNPL space, the growth of the sector and the future of deferred payment options in Europe.

In recent years, the Buy Now Pay Later (BNPL) phenomenon has progressively established itself in the market, first in Anglo-Saxon markets (USA, UK, Australia), and later in Italy. The growth of this financial service has closely followed the evolution of customer purchasing habits. The significant growth of BNPL has been bolstered particularly by the increase in digital channel sales, which has also occurred due to the pandemic. An unprecedented shift in consumerism towards ecommerce spending during Covid-19 has continued following the pandemic and this change in consumer behaviour has seen BNPL establish itself as an attractive payment option in the sector.

BNPL allows merchants (both online and offline) to offer their customers the option to pay for their purchases in instalments without interest or fees, through a non-burdensome deferred payment. Thanks to its simplicity, BNPL has spread among consumers much more rapidly than credit cards, opening up significant growth opportunities internationally for both financial institutions and merchants in various industries. Whilst retail has been the main area for the growth of BNPL thus far, the simplicity of the deferred payment option has a wealth of potential applications.

Currently, BNPL is experiencing a moment of significant discontinuity due to regulatory changes that have incorporated this payment solution into the consumer credit sphere. This is a crucial development that will change the rules of the game, especially for fintech operators that have always favoured significantly simplified onboarding processes.

In Italy, the only bank to seize the BNPL opportunities so far has been Compass, the consumer credit company of the Mediobanca Group. Compass has decided to focus on BNPL, leveraging solid expertise in risk management (applied to origination, collection, and anti-fraud phases) and increasing investments in innovation and digital platforms. This know-how has been further strengthened by two recent acquisitions: Soisy in Italy and HeidiPay in Switzerland.

With the launch of PagoLight in 2021, Compass believed in the potential of BNPL, making the most of the credit management skills developed over more than 60 years of activity. This strategic choice allowed them to anticipate EU Directive 2225 of 2023, enabling them to offer instalment solutions for amounts and durations greater than those provided by pure fintech operators. This approach has consistently gained new market shares, cutting across various industries, prioritising debt sustainability over “one-click” processes for short-term instalments, which generate less value for all parties involved.

As defined in the 2023-26 Strategic Plan of the Mediobanca Group, “One Brand One Culture,” the effectiveness of BNPL in acquiring new customers will be Compass’s strategic lever to offer its digital credit services to an increasingly broad audience of merchants. Thanks to BNPL, merchants can focus on higher consumer purchasing propensity and higher average receipts. This ambition will leverage over 13,000 points of sale and 200 e-commerce platforms already active in Italy, as well as further international growth initiated with the acquisition of HeidiPay Switzerland, bringing over 500 commercial agreements with distributors, luxury brands, and technology operators. Compass’s first step in internationalization will focus on a multi-channel and multi-product offering, fully functional for developing an international network in support of online multi-country merchants.

International, multi-channel, and fully integrated into the credit ecosystem: this is the future of BNPL, supporting consumer aspirations and merchant growth.