NextGen Nordics has returned to Stockholm on 25 April 2023, with a wide range of speakers discussing topics such as P27, cross border payments, open banking, CBDCs, digital assets and Web 3.0.
Ahead of today’s event Finextra spoke with Einar Eidsson, product director at indó Iceland, who will be speaking about BNPL at NextGen Nordics.
Has regulation been able to keep pace with the fast paced innovation and adoption of BNPL?
Probably not in the early days of BNPL, but now there is more and more regulation coming into play. To properly consider this I think we’d have to be specific on the country or region in question, as BNPL is a relatively international payment method and regulators in different places have been moving at different speeds. When BNPL came about there wasn’t much regulation specific to BNPL and sometimes existing consumer lending regulation didn't quite capture BNPL activity within its scope. With that being said, as BNPL transaction volumes grow regulators are looking more closely at this type of transaction connected lending and trying to ensure its governed in line with other types of similar payment and lending businesses.
How do you see continued regulation effecting BNPL?
Personally I think regulation in context to BNPL is really positive for the key participants in a BNPL transaction. It can help to improve core lending processes at companies and banks offering BNPL products, increase consumer trust in BNPL as a payment method and perhaps increase the level of standardisation which benefits merchants that would like to offer BNPL. Continued regulation will add more transparency and BNPL lending will stop potentially being “off the books” of credit agencies that are trying to help others to understand credit worthiness.
Tell us a little about how AI can be used in BNPL. What are the benefits of these and some of the dangers?
Telling “a little” is challenging since the potential areas of applying AI in BNPL are substantial. Right now GPT technology is evolving very fast and it has applications across the whole BNPL transaction chain from the customer choosing what and where to buy to the point the customer finally pays for the product some weeks later. In the non-consumer facing side of executing a BNPL transaction AI and GPT technology specifically has strong applications in areas like fraud detection, credit decisioning and providing more relevant support to consumers. From the consumer perspective AI can help them understand better aspects of their own finance in relation to what they intend to buy, provide an improved post purchase experience as they receive their products and helped them make better informed decisions related to the products they are buying. The dangers relate to the potential amplified biases existing in the training data that could impact for example who gets credit and in what amounts.
Has innovations like AI being used in BNPL helped increase its market share?
I think it's difficult to concretely understand and measure at this point in time if existing AI applications, such as in the area of credit decision making have led to increased market share of BNPL as a payment method. I can however easily imagine that whoever becomes highly proficient of applying something like GPT, which already lends itself well to human communication, doesn't obtain at least a medium term competitive advantage. We’re still in the early days of commercially applying AI technologies and BNPL companies that lean into the technology are bound to reap some benefits.