BNPL

How Buy Now Pay Later (BNPL) Model Works

1. Initial Purchase Process

Customer Journey

• Product Selection
  • Customer browses merchant website/store
  • Selects products for purchase
  • Proceeds to checkout

Payment Option Selection

• BNPL Display

  • BNPL options prominently displayed at checkout
  • Clear presentation of available installment plans
  • Integration with merchant's point-of-sale system

• Plan Selection

  • Customer chooses preferred BNPL provider (e.g., Klarna, Afterpay, Affirm)
  • Reviews payment schedule and terms
  • Selects specific installment plan (e.g., "Pay in 4" or "Pay in 30")

2. Credit Assessment Process

Quick Credit Check

• Digital Verification
  • System performs soft credit check
  • Analyzes digital footprint using 400+ data points
  • Verifies email, phone number, and IP address

Risk Assessment

• Alternative Credit Scoring

  • Evaluates digital footprint
  • Analyzes shopping behavior
  • Reviews transaction history

• AI-Powered Analysis

  • Machine learning algorithms assess risk
  • Real-time fraud detection
  • Behavioral pattern analysis

3. Transaction Processing

Approval and Setup

• Initial Payment
  • First installment collected at purchase
  • Remaining amount split into equal payments
  • Payment schedule established

Merchant Payment

• Settlement Process
  • Merchant receives full payment within 24-48 hours
  • BNPL provider assumes payment risk
  • Transaction fees deducted from merchant payment

4. Payment Collection System

Installment Management

• Automated Collections
  • Scheduled automatic deductions from customer's account
  • Typically bi-weekly or monthly payments
  • System monitors payment status

Payment Processing

• Direct Debit Operations
  • Automatic withdrawal on scheduled dates
  • Status updates and reconciliation
  • Payment confirmation to all parties

5. Error and Exception Handling

Failed Payment Management

• Retry Mechanism
  • System attempts to collect failed payments
  • Communication with customers for resolution
  • Alternative payment methods offered

Recovery Process

• Payment Recovery
  • Dedicated recovery teams manage failed payments
  • Customer communication for resolution
  • Virtual accounts track pending payments

6. Merchant Integration

Technical Setup

• API Integration
  • Implementation of BNPL provider's APIs
  • Integration with existing payment systems
  • Testing and verification

Operational Requirements

• System Configuration
  • Setup of merchant account
  • Configuration of payment terms
  • Staff training and support

7. Security and Compliance

Data Protection

• Security Measures
  • Encryption of sensitive data
  • Secure payment processing
  • Compliance with data protection standards

Regulatory Compliance

• Legal Requirements
  • Adherence to financial regulations
  • Consumer protection compliance
  • Regular audits and reporting