Pine Labs has started 2022 with a big announcement. The leading merchant commerce platform has received a new investment of US$20 million from India’s largest commercial bank, the State Bank of India (SBI).

Pine Labs a fintech company that serves prominent large, mid-sized, and small merchants across India and Southeast Asia.

Its cloud-based software platform enables it to offer a wide range of payment acceptance and merchant commerce solutions including enterprise automation systems such as inventory management and customer relationship management. Its stored value platform includes issuing, processing, and distributing digital gift cards for corporate customers around the world.

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Pine Labs has recorded incredible success thus far. In 2021 alone, the company raised almost US$600 million from a marquee set of new investors and followed it up with a US$100 million fundraise from the US-based Invesco Developing Markets Fund.

In addition to augmenting its merchant commerce offerings at the offline point-of-sale, Pine Labs is now looking to invest in scaling Plural, its newly launched brand of online payment products, and emerge as an omnichannel partner of choice for merchants.

According to B. Amrish Rau, CEO, Pine Labs, having the largest bank of India, the State Bank of India places their trust in them, welcomes them in this journey where they are empowering merchants with seamless and secure payment experiences across offline and online platforms.

“In the last one year, several marquee investors have placed their trust in our business model and growth momentum and that is a gratifying feeling. This association with SBI is a personally satisfying experience as I had started my career selling financial services technology to SBI,” added Rau.

In April 2021, Pine Labs acquired Southeast Asian startup Fave in a deal valued at US$45 million as the Indian firm looks to strengthen its consumer-focused offerings in the domestic and international markets.

Since then, the company has continued expanding its Buy Now Pay Later (BNPL) business across India and Southeast Asia. It also has a leading presence in the Gift, Prepaid and Stored Value segment through its 2019 acquisition of Qwikcilver.

The BNPL industry has been seeing growing competition in Southeast Asia as more companies are now jumping on the bandwagon and offering such services. Last month, Pine Labs announced a regional partnership with insurtech firm Igloo as well.

Towards the end of 2021, Pine Labs also announced the launch of Plural Tokenizer, a tokenization solution that works across leading card networks. This Card-on-File or CoF tokenization solution will replace the debit or credit card details of the cardholder with what are called ‘tokens’ or randomly generated numbers. The launch is in line with the Reserve Bank of India (RBI) guidelines that mandate no entity other than the card issuer or card networks to store actual cardholder data with took effect from January 1, 2022.

The post Pine Labs secures investment from India’s largest bank appeared first on Tech Wire Asia.

As the fourth most populated country in the world, BNPL (buy now pay later) in Indonesia is an increasingly popular payment method among the consumers there. The millennial and Gen Z consumers in particular are thrilled with the flexible financing options for impulse or unexpected purchases.

In fact, reports show that BNPL payment in Indonesia is expected to grow by 72.8% on annual basis to reach US$ 1537.0 million in 2021. The low credit penetration in Indonesia has provided a substantial boost to the growth of the BNPL industry in the country. With 98% of the population now owning credit cards, the demand for the payment method has soared tremendously in recent times, with more BNPL companies venturing into the country.

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As one of Indonesia’s fastest-growing BNPL payment methods, Kredivo has more than 4 million users, representing over 50% of the local BNPL market. Consumers who use the payment method are largely made up of Indonesia’s middle class. Kredivo recently announced an integration with local payments infrastructure provider, PPRO.

The integration enables merchants to reach a large pool of underbanked or unbanked Indonesians.  It gives consumers access to flexible instant credit that enables them to make purchases for essential or bigger ticket items.

For Krishnadas, Vice President of Business Development at Kredivo, the integration with PPRO allows more merchants to offer their customers the option to pay with Kredivo. Through them, Kredivo can strengthen its commitment to allowing Indonesian consumers to access more of the world’s e-commerce market.

The integration is a cooperation between PPRO, Kredivo, and DOKU, a leading payment technology company. The news follows the recent announcement of the integration of two of the most popular payment methods in Indonesia, Jenius Pay and LinkAja, into the PPRO platform. Other payment methods on PPRO’s wider global network include Alipay, WeChat Pay, GrabPay, Bancontact, iDEAL, BLIK, and Boleto Bancário. As part of its ongoing growth strategy, this year also saw PPRO announce that it had raised US$180 million, taking the firm’s total value to over US$1 billion.

“Indonesia continues to be recognized as the world’s hottest battleground for digital payments. The addition of Kredivo to our platform is a milestone in our Indonesia expansion, with the BNPL being the first such player to be integrated into PPRO’s infrastructure. Kredivo now sits alongside other key Indonesian payment players on the platform that enable merchants to better cater to the demands of consumers in one of the world’s fastest-growing markets,” said Kelvin Phua, Head of Global Market Development at PPRO.

Indonesia currently has about 10 BNPL players. Apart from Kredivo, the other major BNPL players in the country include Atome, Akulaku, Splitit, Shopee, Home Credit, GoJek Paylater, Indodana PayLater, AfterPay, and GoPayLater. While the BNPL market has seen increased transactions, there are still concerns about the after-effects of BNPL.

As BNPL offers short-term repayment schemes without any background credit check, critics of the payment method feel that it will only lead to more users falling into the debt trap. Although BNPL does not charge high interest and only offers a minimal late payment fee (depending on the company), the worry is that many consumers will just spend their funds without thinking about the effects in the long run.

There is no denying that BNPL will enable consumers to own more products easily and affordably. But the only worry is, can consumers truly afford and need these products in the first place. Either way, the Indonesian BNPL market is definitely seeing a growing trend among consumers, with no signs of slowing down.

The post BNPL giant Kredivo making it big in Indonesia appeared first on Tech Wire Asia.

The concept of BNPL is simple — it allows the consumer to defer payments into installments that can be repaid over anywhere from one to 12 months, depending on the provider. 

It is hardly a novel or new concept. Banks offer this with credit cards, and large retailers that sell expensive items (e.g. furniture) often offer installment plans as well.

Before banks, small retailers have been using this for regular customers they trust to be able to “pay later” for purchases.

Traditional banks vs buy now pay later

Although both services offer installment payment schemes, one difference is that both target different (debt) markets.

Credit cards provided by banks are marketed to those who can demonstrate (or seem capable of demonstrating) responsible debt repayment. Credit card owners also enjoy perks such as rebates, cashback, or points that can be redeemed for items.

This decision is informed by their creditworthiness (via their credit score), where they are able to show stable income generation and the ability to repay, which banks determine through risk assessment.

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The risk assessment process is designed to gauge the probability of the bank’s financial loss resulting from a borrower’s failure to repay a loan or debt. The lower one’s risk of failure to repay a debt, the higher their odds of getting a loan or credit card approved.

BNPL, however, starts “from scratch” and a customer’s eligibility isn’t based on their credit score. As such, BNPL providers will build their own customer’s “credit score” based on their usage of the BNPL service, as well as their purchasing behavior and other behaviors within the provider’s ecosystem.

Buy now pay later customers can include those who are eligible for credit cards but they primarily target the underbanked or unbanked. Asia, in particular, is a particularly lucrative market due to the high amount of unbanked and underbanked consumers.

Differences in service accessibility

Traditional banking facilities such as credit cards or loans are strictly regulated by the financial authorities of the countries they operate in, which means they can be held responsible to an extent. 

This allows banks to tap into the appropriate segments of the consumer debt market, in a somewhat more responsible manner. 

As the ability of customers to use these facilities is predicated on their creditworthiness, they are notoriously difficult to access for the unbanked and underbanked.

They include college students; fresh graduates who have started a new job; those with unstable incomes (e.g. gig workers), lower-income earners, MSME owners, and others.

This makes buy now pay later services particularly attractive to those who wish to make purchases, especially high-value ones, but lack the cash or the credit facilities to do so. 

Read the fine print

Banks are required to be upfront about fees related to installment plans. However, BNPL services regularly tout 0% installment fees, which may appear very attractive at first.

However, there is a caveat — failure to repay these installments will come with fees for late payment.

As BNPL providers are often not treated as financial institutions, they do not need to abide by financial laws and regulations that their banking counterparts are subjected to.

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This may lead to abuse, as many BNPL platforms may or already charge exorbitantly for late repayment. Thus, the unaware customer may end up paying more in the end as compared to using a credit card — if they can’t repay in time. 

Although BNPL doesn’t require a credit score, some providers may report missed payments to credit report agencies, which may affect one’s credit score. 

The reverse, however, is not true — even if you are a good paymaster for your monthly installments. It has yet to be shown that BNPL platforms will report good payment history to boost one’s credit score.

The consumerism ecosystem

Unlike credit services by banks, buy now pay later services are exclusively and specifically embedded within retail ecosystems. Conversely, banks operate and market their services in a more independent manner, although virtually all still do partner with specific merchants to offer attractive promotions.

This may sound innocent enough on the surface, but one ought to consider that these services are deeply enmeshed in a culture of rampant consumerism. And especially given how the pandemic has forced many to be online more often, it may spell trouble for the consumer.

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In fact, just being on an e-Commerce platform itself may be too tempting to avoid, say, impulse purchases, or commitment to purchases that the customer may not be adequately capable of paying off. 

This rampant consumerist culture — an ecosystem, if you will — is strongly supported by sales techniques such as regular promotions. 

Examples include Black Friday, seasonal/holiday sales, Payday sales, and particularly in Asia, the popular double-double sales (e.g. 10.10, 11.11, etc.).

The predator’s toolset?

The promotion of (excessive) consumerism is one part of the predatory nature of the consumer retail industry, be it online or offline. The other is that marketing — and the psychology behind it — are neither regulated nor controlled in any way. 

Taken on its own, conventional predatory marketing has traditionally been gatekept by hindrances to payment, or geographical limitations (think non-online payments or in-store promotions far from your residence).

Virtually all online retail platforms utilize data analytics and AI to understand their customers better. The goal is to provide targeted and personalized recommendations to customers in order to compel them to make purchases on their sites. 

BNPL providers do the same thing, and most consumers do not realize how their data is being captured and used.

So this may make it even more difficult for customers to resist the onslaught of aggressive digital marketing, including push notifications, and monthly promotions as the products recommended to them naturally appeal greatly to them. Coupled with frictionless payments such as BNPL, the decision to commit to purchases will be far more likely.

Is buy now pay later a debt trap?

The pandemic has greatly affected the financial capabilities of many an individual, especially the young, the lower-wage earners, or the financially illiterate.  

That, together with the aggressive and sometimes irresponsible way retailers promote their products, the targets of BNPL may find themselves in a more precarious financial situation.

The lack of online payment friction, aggressive and unregulated marketing tactics, personalized recommendations, the ease and convenience of shopping online are all engineered to increase sales.

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And now, the ability to access purchases once previously out of reach, as well as increased BNPL service uptake by merchants works in tandem to enhance and ease the process of converting window shoppers into paying customers. 

And when your customer base includes those who traditionally cannot afford bigger or more purchases for whatever reason, the temptation to indulge in purchases is likely to be more difficult to resist. 

Where they previously were not part of the consumer debt market, they are now exposed to this form of debt — something which particularly vulnerable segments should be protected from.

So while buy now pay later may be able to enable the purchase of essential items for those who cannot afford them, it also comes with the risks of expenditures that they may not be able to pay off — a debt trap they cannot get out of when fees escalate.

Of course, some segments will deem these consumers “financially irresponsible”.

But are these purchases truly, fully a result of irresponsible financial management?

Or are the vulnerable caught in the buy now pay later debt trap victims of intelligently-engineered practices by predators armed with data and consumer psychology?

The debate remains.

The post Does buy now pay later prey on the vulnerable? appeared first on Tech Wire Asia.

According to a Reuters report, Standard Chartered announced a 10-year fintech partnership with Atome Financial to help it grab a piece of the booming BNPL market in Asia, that has been thriving in the midst of the pandemic.

Apart from Atome, some of the biggest BNPL players in the Asia Pacific region include Hoolah, GrabPay, Akulaku, Fave, and several others. While there have been critics of BNPL, especially due to its lack of regulatory checks and requirements for granting installment payments, the services have been proven to be successful in the region during these uncertain financial times.

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As the first major bank to unveil a significant foray within the sector in Asia, Standard Chartered is making an undisclosed equity investment in Atome Financial, which operates the Atome platform in markets including Southeast Asia, and Indonesian digital lending platform Kredit Pintar.

In a statement, the bank said the partnership will initially include BNPL services, targeted to roll out in Indonesia, Malaysia, Singapore, and Vietnam in the next few months, and later expand to include digital lending products.

The US$500 million funding will enable Atome Financial to grow and connect a wider ecosystem of merchants to a larger customer base, improving product access and financial inclusion for consumers across the region. At the same time, the bank said Atome Financial’s customers will gain access to more innovative financial services, easily accessed via their mobile devices.

For Judy Hsu, CEO, Consumer, Private and Business Banking at Standard Chartered Bank, the bank’s successful digital ventures and partnerships enable them to continue to be fearlessly innovative in disrupting ourselves to better serve their clients. “This partnership with Atome Financial allows us to be part of the rapidly growing digital consumer finance ecosystem and provides convenient and relevant digital financial products to complement and enrich clients’ digital lives,” said Judy.

The bank’s deep knowledge of Asia’s markets coupled with Atome Financial’s experience in digital consumer finance will allow them to reach even more customers and drive greater financial participation of those underserved and underbanked.

Jefferson Chen, the Co-Founder, Group Chairman and CEO of Advance Intelligence Group, not to mention the CEO of Atome Financial, commented that  “By providing consumers with easier, simpler, and more convenient access to a full suite of digital-first financial services, we can accelerate broader financial inclusion across both developed and emerging markets in Asia.”

Jefferson added that the partnership with Standard Chartered will allow them to expand their merchant network and help retailers increase their customer base and basket sizes, contributing to economic growth across the region.

More banks may consider BNPL after Atome

Meanwhile, Kanv Pandit, Group Managing Director, APAC, Banking Solutions, FIS believes banks are actively looking for ways to tap into the rapidly growing BNPL market, or they risk being left out of a major new market opportunity.

As BNPL’s global e-commerce market share is expected to double to 4.2% by 2024, in Singapore it is the fastest growing online payment method, on track to represent 13% of all e-commerce sales within the same period. He added that Some banks choose to launch their own BNPL offerings, either through the extension of their own credit card offerings or directly to merchants, Citibank being an example.

“In the case of the SC-Atome tie-up, this is a good example of “banking-as-a-service” in play, where a bank offers their platform to the BNPL provider to deliver an expanded set of financial products to the consumer. With its own set of benefits, we can expect to see more of such tie-ups and investments,” explained Kanv.

Kanv also pointed out that banks are looking to take advantage of the current conducive regulatory environment that has allowed BNPL services to flourish. This will also enable banks to leapfrog the product gap they have via such partnerships.

“On the BNPL providers’ end, they are rapidly seeking opportunities to expand their portfolio and leverage strategic partners to differentiate themselves from other players, creating more revenue models and improving their risk models at the same time. Banks can also offer them valuable market insights, given the wealth of data they hold,” clarified Kanv.

The reality is, with BNPL seemingly the preferred method of payment by consumers, banks may eventually just have to follow suit and give in to their demands if they want to remain competitive in the industry and remain relevant.

The post Standard Chartered invests US$500 million in BNPL trailblazer Atome appeared first on Tech Wire Asia.

Traditionally, any form of purchase over instalments would require credit cards. And to get a credit card, one would need to apply from a bank and have their credit score checked before being given access to one. While credit cards offer the flexibility of a lower repayment over longer periods with zero or minimal interest, many fail to get access to them due to banking credit scores.

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However, BNPL is now changing that. Today, almost anyone with a bank account and online banking capabilities can have access to purchase over instalments. For banks, BNPL has marked a significant concern for their growth, especially with the younger generation preferring a no-frills and seamless approach to banking and finance.

With the BNPL market expected to reach US$20.4 billion by 2028, banks are also now looking into tapping the market by partnering with fintech and non-fintech companies in offering such services. In fact, the online segment is anticipated to register the highest growth with numerous e-commerce companies partnering with BNPL platforms.

The role of embedded finance in BNPL

For banks, embedded finance is now a priority. More banks are looking at how they can inject traditional financial services such as payment capabilities, or loan applications within a non-banking application.

Today, several lifestyle apps are doing this. Banking-as-a-Service (BaaS) are enabling non-financial applications to consume these services and make the most out of them. With both BaaS and embedded finance interrelated, banking information services are slowly being integrated and exposed into the economy.

(Source – FIS)

According to Kanv Pandit, Group Managing Director, Asia Pacific, Banking Solutions at FIS, the move towards embedded finance is a stampede as banks are looking to partner with both fintech and non-fintech companies to become their embedded finance provider.

“Consumers are driving this. They want to have an integrated experience. They prefer discreet banking. Be it BNPL or protection on products, there are now more opportunities to consume more simple payments compared to complex products. Banks and financial firms have noticed this,” said Kanv.

For example, banks are bringing their capabilities and partnering with non-financial providers like a messaging application or a transport app to embed a landing capability in that application.

Kanv also pointed out that the BNPL and embedded finance trend in APAC matches and, in some cases, exceed what’s happening in the US and Europe. From a tech standpoint, Kanv explained that APAC has an advantage as there is fewer legacy and more contemporary platforms compare to the US and Europe. While they have trouble integrating with fintech, it’s much easier in APAC.

Why didn’t banks initially tap into BNPL?

Kanv acknowledges that while BNPL is proving to be successful, the opportunity factor for banks to tap into segment was minimal in the past. Constraints of technology and the ability to integrate with various merchants are some of the reasons that hindered banks from looking into BNPL capabilities in the past.

Before the rise of BNPL and fintech, banks were dominating the industry with credit cards. And credit cards enabled them to have all the credit information of customers and enabled them to offer services based on these data.

However, with BNPL being enabled at a real-time point of purchase, credit decisions are now very different compared to BNPL providers today. Banks could not look at instant credit decisions due to the heavy and traditional regulations there were bounded to.

Despite this, Kanv said the industry is seeing a lot of collaboration happening now. Both BNPL and banks are coming together for a favourable situation for both.

“BNPL can tap into the banking system. BNPL has technology and credit models that make it attractive to banks to partner with it. At the same time, both are also learning the ropes to do it independently. While they are collaborating, both are also looking to launch their own offering in the market. It’s a great place for both of them now, especially with a phenomenal amount of investments pouring in,” said Kanv.

At the same time, regulators are also being supportive as it represents an expansion of financial service access and opening up a credit opportunity for those who couldn’t seek it in the past.

(Photo by Saeed KHAN / AFP)

The future of banking

Interestingly, Kanv also said that he is watching for examples of reverse embedded finance. Reverse embedded finance would see financial institutions offer non-financial services. He believes that banks would be trying to flip this and make an opportunity out of it.

With so many different points of payments being made, it would be interesting to see how banks can do this on their own platform. Simply because banks have a lot of experience when it comes to superiority and maturity which they can bring in.

For example, loyalty programs are something banks and credit card issuers have been offering for decades. This mature capability is lacking in fintech, and banks can use reverse embedded finance there.

With that said, Kanv believes that the traditional consumer pool of banking will shrink. They will be looking to tap into unaddressed pools to make sure they can sustain and grow. There is no denying that banks will still be relevant in the future.

“Embedded finance and BaaS are tools but not the ultimate ways of banks having a critical role. Banks will tap into technology like never before. They are participating actively in the economy and continue to be relevant in the future. They will evolve, they have shown it in the past and are more than ready to face up to the challenge,” concluded Kanv.

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BNPL (buy now pay later) has been seeing increased demand amongst customers in recent months, although enabling such options for merchants was previously limited.

Recently, Grab announced a stronger partnership with payments platform Adyen to enable BNPL facilities for merchants. Starting in Singapore and Malaysia, merchants can offer Grab’s PayLater service to serve a growing customer base looking for deferred payment methods.

Available through the GrabPay wallet, merchants will now be able to offer PayLater payment methods during the checkout stage, allowing customers to purchase what they want and pay for it later without interest. 

Customers will be able to choose between interest-free payments over four installments (PayLater installments), or the following month (PayLater Postpaid).

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Increased customers common with BNPL-enabled merchants

In May this year, Southeast Asian e-Commerce fashion platform Zalora introduced this deferred payment method through Adyen. The company reported a 20% increase in new shoppers and a 15% increase in users using GrabPay to complete a purchase. 

The online retailer has also seen an increase in sales as shoppers who used Grab PayLater had larger basket sizes, compared to those who used Grab Wallets. Zalora reported that in Malaysia, basket sizes were 32% larger, whereas, in Singapore, they were 12% larger.

“When it comes to online purchases, shoppers want secure, convenient, and frictionless checkout experiences. The PayLater option by Grab ticks all those boxes, while also enabling us to give our customers more flexibility to choose from their preferred payment methods. 

“Not to mention, by having all our payments on a single platform via Adyen, we have a single source of truth for data, can scale easily, and track all transactions in one portal”, said Kannan Rajaratnam, Director of Payments, Zalora.

“We expanded our partnership with Adyen to offer PayLater to businesses, starting in Singapore and Malaysia, as many of our merchants are already integrated with Adyen via their existing APIs. 

“This means they can now easily add deferred payment methods as another flexible option for their customers, at no extra cost,” said Chris Yeo, Managing Director and Head of GrabPay, Grab Financial Group.

“Buy Now, Pay Later options are becoming more popular in Asia, and we see demand growing. This partnership gives our merchants the ability to offer this payment method, so their shoppers have more flexibility in paying for their purchases via their preferred payment approach,” said Warren Hayashi, President of Asia-Pacific, Adyen.

Grab and Adyen have been partners since 2016 when the super-app first selected Adyen to extend its GrabPay capabilities across Southeast Asia.

The concept may be popular, but critics warn of risks

BNPL isn’t entirely new — it’s been around since last year and has made its mark across various countries in Southeast Asia, and Australia. Earlier this month, Apple announced a collaboration with Goldman Sachs to offer this service to their customers as well.

However, whilst consumer demand for BNPL grows, many have warned that it would be a ‘debt trap’ — Malaysian personal finance expert Suraya Zainuddin (of RinggitOhRinggit) is a vocal critic of the concept.

Her main criticisms include that these payment providers target the debt market without needing proof of recurring income and the financial ability to pay back, as well as luring customers into purchasing things they cannot otherwise afford, on credit.

According to a 2017 article in the New Straits Times, only 43.6% of Malaysian credit card users pay their balance in full — and these are the consumers who are supposed to be ‘credit-worthy’.

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