Why buy now pay later providers need to prioritize customer financial wellness

Building sustainable growth through responsible lending and customer support

Published: 2022 Author: Symend Reading time: 9 minutes

Key Takeaways

BNPL growth depends on customers' ability to repay, making financial wellness essential
Supporting customer financial health reduces default rates and improves long-term profitability
Regulatory pressure is increasing around responsible lending in the BNPL space
Financial wellness programs differentiate providers and build customer loyalty
Technology enables scalable wellness support without sacrificing growth

Buy now, pay later (BNPL) services have exploded in popularity, offering consumers flexible payment options and enabling merchants to increase sales. However, as the industry matures, a critical question emerges: how can BNPL providers ensure their growth is sustainable and their customers financially healthy? The answer lies in prioritizing customer financial wellness.

The BNPL Growth Challenge

BNPL providers face a fundamental tension. Growth requires acquiring new customers and increasing transaction volumes. Yet sustainable profitability depends on customers successfully repaying their obligations. When customers overextend themselves or default on payments, both the customer and the provider lose.

This tension intensifies as competition drives providers to offer increasingly generous terms and expand into higher-risk customer segments. Without attention to customer financial wellness, rapid growth can lead to unsustainable default rates that erode profitability and damage brand reputation.

The Hidden Costs of Financial Distress

When BNPL customers experience financial difficulty, the costs extend beyond simple default rates:

Increased Servicing Costs

Customers struggling with payments require more customer service contacts, collection efforts, and administrative attention. These operational costs can quickly exceed the revenue from successfully completed transactions.

Lower Customer Lifetime Value

Customers who default or struggle with payments are less likely to use the service again. The lifetime value of these customers plummets compared to financially healthy users who make repeat purchases.

Reputational Risk

Stories of customers accumulating unmanageable BNPL debt damage provider reputations and attract regulatory scrutiny. In an industry built on trust and convenience, reputational harm can be existential.

Regulatory Exposure

Regulators worldwide are increasingly focused on BNPL providers, particularly around responsible lending and consumer protection. High default rates or evidence of customers in financial distress invite regulatory intervention.

Why Financial Wellness Benefits BNPL Providers

Investing in customer financial wellness isn't altruism—it's smart business strategy:

Lower Default Rates

Customers who understand their financial situation and receive support during difficulty are more likely to successfully complete payments. This directly improves provider profitability.

Higher Customer Retention

Customers who feel supported by their BNPL provider develop loyalty. They're more likely to choose that provider for future purchases and recommend it to others.

Sustainable Growth

Growth built on financially healthy customers is sustainable. These customers can continue using BNPL services over time without accumulating unmanageable debt.

Competitive Differentiation

As the BNPL market becomes crowded, providers that demonstrate genuine concern for customer wellness stand out. This differentiation attracts both consumers and merchant partners.

Regulatory Advantage

Proactive attention to customer financial wellness positions providers favorably as regulations evolve. Demonstrating responsible practices can influence regulatory frameworks.

Key Components of BNPL Financial Wellness Programs

Effective financial wellness initiatives for BNPL providers include several critical elements:

1. Responsible Underwriting

Financial wellness begins at origination. Responsible underwriting ensures customers are offered credit they can realistically repay:

Assess ability to pay, not just credit history
Consider total BNPL exposure across providers
Set appropriate limits based on individual circumstances
Avoid pushing maximum available credit

2. Transparent Terms and Education

Customers need to understand exactly what they're committing to:

Clear disclosure of payment schedules and amounts
Explicit explanation of fees and consequences of missed payments
Education about how BNPL affects overall financial health
Tools to help customers track total BNPL obligations

3. Proactive Monitoring and Alerts

Help customers stay on top of obligations before problems develop:

Payment reminders timed to customer cash flow
Alerts when customers may be overextending
Early warning when payment patterns suggest difficulty
Personalized spending insights

4. Flexible Payment Options

Recognize that customer circumstances change:

Easy ability to adjust payment dates
Options to extend or modify payment plans
Pause features for temporary hardship
No-penalty early payment

5. Financial Education Resources

Empower customers with financial knowledge:

Budgeting tools and templates
Educational content about managing multiple payments
Resources for improving overall financial health
Guidance on responsible BNPL usage

6. Empathetic Collections

When customers do struggle, approach with understanding:

Early, supportive outreach rather than aggressive collection
Personalized assistance based on individual circumstances
Focus on finding sustainable solutions
Respect and dignity in all interactions

Technology Enables Scale

A common concern is whether financial wellness programs are economically viable at BNPL scale. Technology makes it possible:

AI-Powered Risk Assessment

Machine learning models can assess not just creditworthiness but financial wellness, identifying customers who may struggle even if they qualify for credit.

Behavioral Science Platforms

Automated systems can deliver personalized financial wellness interventions at scale, using behavioral insights to drive positive outcomes.

Predictive Analytics

Advanced analytics identify early warning signs of financial stress, enabling proactive support before customers default.

Automated Personalization

Technology enables personalized education, reminders, and support for millions of customers without proportional increases in operational cost.

Regulatory Trends and Financial Wellness

Regulators globally are paying increasing attention to BNPL providers, particularly around:

Responsible lending and affordability assessments
Clear disclosure and consumer understanding
Treatment of customers in financial difficulty
Overall consumer protection frameworks

Providers that prioritize financial wellness are better positioned as regulations evolve. Demonstrating proactive commitment to customer financial health can help shape regulatory frameworks and avoid more restrictive interventions.

Implementation Roadmap

For BNPL providers ready to prioritize financial wellness, consider this phased approach:

Phase 1: Foundation

Audit current underwriting for responsible lending practices
Enhance payment reminder and communication systems
Develop clear, accessible educational content
Establish metrics to track customer financial health outcomes

Phase 2: Enhancement

Implement predictive analytics for early risk identification
Develop flexible payment modification tools
Create comprehensive financial wellness resources
Train customer service teams in empathetic engagement

Phase 3: Integration

Embed financial wellness throughout the customer journey
Leverage AI for personalized wellness interventions
Build strategic partnerships with financial wellness platforms
Make wellness a core differentiator in marketing and positioning

Measuring Success

Financial wellness programs should be evaluated on multiple dimensions:

Default rates: Are they decreasing over time?
Customer retention: Are customers continuing to use the service?
Customer satisfaction: How do customers perceive the provider?
Lifetime value: Is the value of the customer base increasing?
Regulatory positioning: Are you leading industry standards?
Brand perception: Are you known for supporting customer wellness?

The Path Forward

Buy now, pay later services offer genuine value to consumers by providing payment flexibility and convenience. However, maximizing this value while ensuring sustainable business growth requires prioritizing customer financial wellness.

BNPL providers that invest in financial wellness programs aren't sacrificing growth—they're ensuring it's sustainable. They're not just avoiding regulatory problems—they're building better businesses with stronger customer relationships and more resilient revenue streams.

As the BNPL industry matures, the winners will be providers who recognize that their success is inextricably linked to their customers' financial health. Supporting customer wellness isn't a cost—it's an investment in the future of the business.

The question isn't whether BNPL providers should prioritize customer financial wellness. It's whether they can afford not to.