Temenos Launches Industry’s First AI-Driven Buy-Now-Pay-Later Banking Service on the Temenos Banking Cloud
New Temenos Buy-Now-Pay-Later (BNPL) banking service helps banks and non-banks offer AI-driven variable installment loans to their customers at the point of purchase
Temenos the banking software company, announced the launch of its Buy-Now-Pay-Later banking service. This offering will open up new revenue opportunities for banks and fintechs, help them reach new markets and cement their relationships with both consumers and merchants through alternative credit products.
Temenos BNPL, combined with patented Explainable AI, can help banks create ethically-driven lending programs by providing transparency into automated decisions and matching BNPL customers with appropriate credit offers based on their history.
As more consumers have turned to e-commerce amidst the pandemic, point-of-sale installment loans have grown in popularity and value. Consumer credit and installment loans have been revolutionized in the Banking-as-a-Service (BaaS) era by BNPL, which is seamlessly embedded into the customer buying journey to provide consumers a frictionless digital experience and easy access to finance at the point of sale. It also helps merchants improve retail customer acquisition, share of wallet, and retention. In 2021, online revenue through BNPL increased by 45% compared to 2019.1 McKinsey estimates fintechs have diverted up to $10bn in annual revenues away from banks over the past ~24 months with BNPL offerings.2
BNPL provides significant advantages for both fintechs and banks. Fintechs benefit from rapid customer and merchant acquisition with relatively lower credit risk and more payments transactions. At the same time, banks can strengthen engagement with their customers, increase wallet share and loyalty by creating seamless, convenient purchasing experiences. BNPL can be profitable for incumbent banks that can build on their strengths, such as providing greater flexibility of loan terms and conditions and higher capital utilization due to faster loan turnover and lower regulatory capital requirements. Furthermore, BNPL presents cross-sell opportunities with potentially more engaged bank and non-bank customers.
The Temenos Buy-Now-Pay-Later banking service is independently consumable via the Temenos Banking Cloud. It’s agnostic of the underlying core banking system, being deployed alongside Temenos Transact or any other core banking solution and incorporates industry best practices while offering responsible lending capabilities to help providers adapt to evolving regulations. By offering the BNPL banking service, Temenos provides a fully flexible, pay-as-you-go solution that enables banks to rapidly introduce BNPL at scale without having to provision new IT infrastructure, so that they can focus on the customer experience.
By embedding XAI, Temenos enables clients to pre-approve loan applications or propose variable installments in real-time based on pre-determined criteria, including soft and hard credit scoring, while providing transparency into how decisions are made. This enables banks and fintechs to lend ethically, provide transparency into recommended payment schedules during the application process, and ensure that consumers can afford the repayments.
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A global payments provider launched its Buy-Now-Pay-Later service on the Temenos Banking Cloud, growing to 22 million loan applications in just nine months, the fastest and most successful product launch in the company’s history. 70% of its customers are repeat users who love the product, with 50% using it again within three months.
Ginger Schmeltzer, Strategic Advisor, Retail Banking and Payments, Aite-Novarica Group: “Buy-Now-Pay-Later continues to grow in popularity, and this is reflected in increased adoption by retailers like Target and Amazon as well as a growing number of small and mid-sized merchants. The Temenos SaaS solution for BNPL, combined with embedded AI, brings together proven technology with increased speed, efficiency, scalability and decision-making transparency. Temenos’ robust and flexible BNPL as a Service will make this new business model available to companies of any size from the credit unions and the challengers, to global payments providers and Tier 1 banks.”
Max Chuard, Chief Executive Officer, Temenos, said: “In an extremely competitive market, financial services providers need to evaluate new business models to drive revenue. As the strategic technology provider for over 3,000 banks worldwide, we are committed to empowering our clients to pioneer and adopt those new, profitable business models. Buy-Now-Pay-Later has shown the industry that we can come up with new solutions to old problems. It has challenged the way we think about customer engagement, acquisition and retention. We are very excited to launch this new solution to enable our clients to offer alternative financing that is fast, seamless, and scalable.”
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