Feb 27, 2022
People need to buy things every day, and most of the time rely on credit cards for those purchases. Still, sometimes consumers choose to neglect one credit card for another or go for Buy Now Pay Later solutions that have gained immense popularity over the years.
Credit card limits are not updated unless the consumer actively asks for an increase but let’s face it, consumers don’t want to call customer service unless they absolutely must.
BNPL solutions saw the credit card limit as an opportunity to enter the world of payments and offer something new, and it caught on. BNPL checks consumers’ affordability and product information in real-time to decide whether to approve or decline the transaction.
BNPL understood that out-of-date credit limits don’t represent consumers’ ability to pay back their loans. It’s part of why big purchases or purchases that exceed the credit card limit and get declined by banks find their way to Buy Now Pay Later companies.
But what’s so interesting about how BNPL does business compared to credit cards?
At first glance, you could say credit cards and Buy Now Pay Later solutions are not so different. They want to keep their customers satisfied and protect themselves while approving short-term loans for various reasons.
But the most significant difference between BNPL and issuing banks’ approach to authorizing payments comes down to 2 things:
It’s hard to assess the legitimacy of the payments on your own when payment flows are complex and lack vital payment-specific information and data points that could change the bank’s decision to approve or decline the transaction.
Let’s take the most basic example, banks don’t know what products or services are purchased. For some reason, merchants are the only ones that can see the product information. But with the rise of online payments and false positives, consumers suffer the most, and their frustration pushes them to look for other solutions.
Banks that want to retain their customers must make a change and understand that affordability should be examined on a case-by-case basis and in real-time to truly get the big picture. With the available solutions today, it can be an easy change to make.
One of the biggest challenges banks face is insufficient data and a lack of communication and collaboration between the parties involved in the payment flow.
For example, in today’s banking world, providing credit for a specific reason like a car, house, vacation is less risky than an all-purpose loan limit per transaction. Banks simply don’t have access to the critical data their risk assessment models need to make better split-second decisions on a case-by-case basis.
But with the right tools, banks can provide a better shopping experience that will make them the preferred credit card instead of making it easy for consumers to switch to competitors.
Here’s what banks can do differently today.
Sharing rich data and making real-time decisions can be challenging without the proper infrastructure. Kenbi delivers a channel of communication between merchants, processors, and issuing banks where the data and payment flow is shared and leveraged with one goal in mind: approving more transactions.
While Kenbi’s AI engine cross-checks the different data elements in under a second to determine the transaction’s legitimacy, you can deliver the excellent and seamless shopping experience your cardholders deserve.