BNPL Helps UK Consumers Manage Expensive Vehicle Repair Costs

Ukraine war-induced supply chain disruptions coupled with a biting cost of living crisis in Europe have led to a record slump in new car sales in the last year.

As James Jackson, CEO at U.K. auto startup Bumper, told PYMNTS, that slowdown in new car sales has meant that there’s been a significant increase in average vehicle age across the region, from about 8 years old to over 11 years old in the last five years.

And “the older the vehicle on the road, the bigger the repair bill most likely is,” Jackson said, pointing to how demand for niche services like Bumper’s repair now, pay later, which enables customers to split car repair costs over monthly repayments interest-free, has been positively impacted by the growing trend.

The U.K. FinTech firm’s marketplace, where drivers can search for a garage within the Bumper network, apply for buy now, pay later (BNPL), and then book an appointment directly into the workshop calendar of one of its clients, is also continuing to gain traction, he noted.

In fact, the business-to-consumer (B2C) proposition has not only been a great lead generator for dealers on the platform but has also helped increase adoption of Bumper’s products as well, Jackson explained. “We call it a double-sided network effect. It’s benefiting the dealers and also helping to drive growth for Bumper as well.”

To stay ahead of the lending curve, Jackson said the use of artificial intelligence (AI), particularly machine learning, to analyze more and more data sets, has been crucial to underwriting much more accurately than a standard BNPL provider could.

“One of the big new areas for us as we become more embedded into car dealers’ software is that we’re using the actual repairs and the past items as well as vehicle data, consumer finance data and behavioral data as new data sets to help underwrite customers,” he noted.

Finally, as part of its strategy to own payments — both digital and in-person — in the European auto market, the firm has recently launched a card terminal to enable dealers to offer BNPL at the terminal, as well as have access to embedded open banking products.

As Jackson said, “It’s just another enhancement to help digitize and help make payments smoother in dealerships.”

Open Banking: ‘Pennies Rather Than Pounds’

By enabling real-time access to a customer’s credit history as well as ensuring quick and secure account-to-account (A2A) payments, open banking technology can improve the BNPL experience in the automotive industry, Jackson previously told PYMNTS.

Against that backdrop, the car repair-focused BNPL platform launched open banking payments for its dealers last November, a move which, per Jackson, has been “transformational” due to the significant uptake in dealer demand recorded since.

In fact, dealers are not only using the A2A option to split car repairs but are also using open banking payments for car sales which, he said, has accelerated growth in a relatively short amount of time to about £3 million to £4 million of open banking payments as of May 2023.

And by creating additional open banking awareness among dealers, it should be possible to hit hundreds of millions of pounds once the technology is established across Bumper’s entire network, he added, because paying “pennies rather than pounds” is a much more attractive option than having to pay a 1% card fee on an expensive auto repair bill.

It’s also about the speed of payment, he added, as cash flow is even more crucial in the current economic downturn: “With open banking payments, dealers receive payment in seconds, rather than waiting two or three days.”

That transaction speed, according to Jackson, and the ability to minimize fraudulent payments, are key elements that will continue to drive the growth of open banking payments in the automotive sector.

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