Strong Credit Engine, Global Partnerships, Keys to Big Wins in EU BNPL Market

The pandemic and associated economic difficulties have given way to a buy now, pay later (BNPL) boom worldwide as consumers embrace the option of paying for goods in multiple interest-free installments, rather than using high-interest card payments.

According to recent data gathered by PYMNTS, in 2021, BNPL use among U.S. consumers shot up by 81% from 2020 figures, with the service gaining traction across all age groups.

Read more: PYMNTS Intelligence: BNPL Provides Flexibility and Buying Power to Younger Consumers

In the Netherlands, Dutch BNPL FinTech firm in3 has been capitalizing on the growing trend in recent years and has seen its revenue increase 300% year-on-year since it launched in 2018.

According to CEO Hans Langenhuizen, the company’s winning strategy has been to give customers the freedom to purchase the items they want — while setting the credit offer at a limit they can afford.

He said with some BNPL models, the fees can add up to more than the original purchase cost, so that a person buying a jacket for €50 could end up paying a total of €80 after using those BNPL solutions.

“We don’t charge fees — that’s the credit card business,” Langenhuizen told PYMNTS in a recent interview. “That’s what people are doing in other [financial organizations] to get more money from the fees and from the revenue they get from merchants.”

See also: One-Click Payment Experience Drives BNPL Adoption by European Consumers

To differentiate itself from other players, the Amsterdam-based BNPL player has instead adopted a business model that focuses on merchant fees. Because in3 incurs losses when customers don’t pay back loans, ensuring that they are lending the right amount to the right customers has been key.

“It’s very important to have a very good credit engine to determine if somebody who wants to buy with us, in combination with the merchant they’re buying from, is able to purchase the goods and pay on time — because otherwise, we don’t make money,” Langenhuizen explained.

So far, it appears that infrastructure investment is paying off. He said their percentage of non-performing loans is “five to 10 times less” than their competitors, and their credit engines are able to predict in seconds — and at a 99% accuracy rate — if a potential customer will be able to pay off the credit on time.

A Win-Win Partnership

The firm currently provides more than 1,500 online and offline merchants with BNPL payment solutions, serving customers like U.K. car servicing and repair company Kwik Fit and Dutch firms La Souris, Matt Sleeps and Dekbed-Discounter.

To further expand its business, the FinTech recently closed a funding round of $11.1 million and partnered with global digital payments leader Worldline to allow merchants who are part of the Worldline network to offer BNPL payment services to their customers without additional integrations.

In return, in3 will gain access to Worldline’s 125,000 merchants — a “win-win situation” for both partners, Langenhuizen said. To take it up a notch, the product is now available in physical stores, enabling in3 customers to pay with an app while boosting demand and awareness around the BNPL service.

While some high-profile BNPL firms are facing regulatory issues to curb overspending, Langenhuizen was optimistic that for in3, there was no cause for concern.

“We embrace regulation because our business is not about collecting fees, [and] regulators love us because our business model is really clean,” he said. “That’s the reason why we say, ‘You can come with regulation, we’re ready for it.’”

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