Consumers in this digital era have more options when they want to pay for a product or service. According to various surveys conducted by DSInnovate, digital wallets and paylater applications (aka BNPL or Buy-Now-Pay-Later) are the two most popular fintech products used by consumers.
This trend needs to be anticipated by businesses. One of the ways to do this is by accepting payments from various types of platforms. For digital wallets, businesses can now use QRIS to accept payments from any application. However, activating a paylater for a business requires several more complex stages. The addition of these options is needed to provide convenience for consumers.
There are several benefits that businesses can gain from providing a wider range of payment options, including:
- Increase the number of transactions
- Increase user loyalty
- Increase competitiveness
- Facilitate business management
Opportunity to use paylater for business
According to IDC research results, in 2025, Indonesia will become the largest market for paylater services. Paylater users will increase by 8.7x compared to 2020. This projection is quite reasonable because credit card use has only touched 6% of the total population, according to data from Bank Indonesia. Meanwhile, to meet their diverse needs, the community needs an alternative, installment-based payment that is more affordable.
On the other hand, the ecosystem of paylater players in Indonesia is getting wider. There are currently paylater service providers responding, some of which also provide features for payments at offline retail outlets.
Paylater implementation in business payment systems
There are several options to bring these payment options to business and activate a paylater system:
Developers of digital applications, such as e-commerce or others, can provide certain paylater options using the API mechanism because every paylater service provider also has an Open API scheme that businesses can use. This model offers both challenges and advantages. As far as the advantages go, the payment platform is more native and can be customized according to the user experience and user interface desired by the developer.
Meanwhile, developers must integrate API services from each paylater company separately for the drawbacks. Of course, this requires a high effort, which has the potential to increase the cost (investment) in the development process.
Via Payment Gateway Platform
Digital service developers can take advantage of the payment gateway platform to support their payment system. Going through the payment gateway platform on the development side can be much more efficient because it only needs to do the integration once. Several payment gateway providers currently provide paylater options, although not many are complete.
However, a payment gateway is a paid service that usually charges a monthly fee per transaction. So, it needs to be taken into account with the operational costs that the business will incur.
Using Point of Sales Service
For offline merchants to be able to accept digital payments such as paylaters, they need to use Point of Sales (PoS) services. PoS is usually in the form of a cashier or payment receipt application, either in mobile form or installed on a computer. This mechanism is considered the most effective because PoS is based on SaaS (software as a service), a ready-to-use service that does not need to be configured in a complicated way.
In addition, some paylater providers also have a partnership mechanism with retailers. To activate the paylater service, there is a special cooperation mechanism that is assisted by partners providing the paylater platform directly, so there is no need to go through an intermediary such as a PoS provider.
The role of Open Finance for the paylater business
Fundamentally, paylaters enter into loan-based fintech services. Per the regulations, there needs to be some processing carried out by service providers to sell these services, such as the KYC process and credit scoring. Besides being useful for ensuring user safety and comfort, these processes are also directly correlated with the quality of the business/service delivered.
For example, if the KYC process is not optimal, it has the potential to create disturbances like a fraud. Meanwhile, suppose the credit scoring process is not appropriate. In that case, it will result in a huge potential for default on the consumer side — which will be detrimental to the business itself.
Seeing this gap, the Open Finance platform comes with service innovations to equip fintech companies with a stronger infrastructure layer. Finantier is an Open Finance service developer serving the Indonesian and Southeast Asian markets. Through its products, Finantier wants to help fintech companies, such as paylater providers, to be able to present more capabilities.
The feature options offered for the paylater use cases are as follows:
- Instant e-KYC allows paylater developers to present an e-KYC process that is simple and easy to follow while still validating population data to the relevant authorities.
- Alternative Credit Scoring helps fintech companies increase the depth of their credit scoring system by utilizing digital data outside of SLIK as an alternative to reach a wider audience of customers.
- Recurring Payments provide convenience to consumers in making recurring and scheduled installment payments with an automatic mechanism, for example, by allowing the debit process through the debit card owned to pay monthly bills during the tenor period.
The following is an overview of the implementation of these products in Paylater's business processes: