According to the Q4 2021 Buy-Now-Pay-Later (BNPL) Survey report, fintech paylater services in Indonesia are expected to experience 94.7% annual growth in 2022. Reaching that would book a market size of $2.6 trillion. Meanwhile, Indonesia's paylater growth is estimated to reach 2028 at a CAGR of 44.4%.
Growth is rapid in developing countries where credit card penetration is still low. The paylater system has now become a payment option in various online and offline retail types. With the growth potential still significant, business people continue to explore opportunities to implement this service.
The following article will discuss how paylater services work and how Open Finance can make the development process more efficient.
How paylater works.
Paylater system is often integrated and offered as one of the payment options — either through an integrated payment gateway in e-commerce or a Point of Sales device for traditional retail.
As a service based on fintech lending, a user must go through several onboarding processes before being able to use the service. Some onboarding activities such as identity verification and credit risk assessment are carried out through the Paylater application.
After going through this process, users can use financing services to purchase the goods. Users can set the loan terms such as loan tenor and repayment agreement.
Optimizing the onboarding process on Paylater
Open Finance can assist Paylater providers in developing and operating their services, one of which is in the onboarding process. Some of the Open Finance products used here are Income & Identity Verification/eKYC and Innovative Credit Scoring.
Income & Identity Verification can streamline the process of developing e-KYC (Know Your Customer). The built-in capabilities help platform owners verify data and potential occupants' identities using various sources like government and other services databases such as telco and banks.
Meanwhile, Innovative Credit Scoring assists the platform in assessing prospective customers' risk level and eligibility to receive credit using machine learning. Here the system combines data from various sources, both from primary sources such as SLIK (Financial Information Service System) and alternative sources such as telecommunication data, PPOB purchase history, and more.
Many benefits can be obtained when Paylater providers optimize the use of Open Finance products in its services, including:
1. High level of data accuracy.
Data accuracy is one aspect that Open Finance developers such as Finantier pay great attention to. User's data is cross-checked with multiple sources and processed by an algorithm to produce helpful information for service providers.
2. Development efficiency.
By using Open Finance, a company can save more resources, costs, and time. Instead of being preoccupied with developing the required infrastructure, they can focus on building their main platform features and services to acquire more users.
3. Has a regulatory umbrella.
Every financial technology-based feature must comply with existing rules in terms of technical development and standardization of system architecture. Finantier is registered with the regulator (in this case, the Financial Services Authority, i.e. OJK).
4. High level of data security.
Data privacy and security are crucial aspects of any financial system. Without a solid security system, it will be vulnerable to various cyber risks that harm users. Finantier has also implemented strict standardization in multiple aspects as a preventive measure, one of which is by following the standards in ISO 27001:2013.
Improving Paylater user experience
Open Finance providers such as Finantier utilize the Open API model. This mechanism allows e-KYC and credit scoring services to be integrated directly into the system back-end, thus providing users with a seamless experience.
In addition, the alternative data provided by the Open Finance provider enable companies to target the 'unbanked' sector as their potential users. The alternative data provided for credit assessment allows service providers to get a better financial profile of their users.
In addition to the onboarding process, businesses can still explore other capabilities of Open Finance for their use to support a paylater system. Such as Account Aggregation to link and aggregate users' financial accounts.