Insights and Inspiration



Explosion of BNPL and the Impact on Debt Collection

Paul Sweeney | Head of Product

In the first post of this series 'Why Digital Debt Collection is Driving Post Pandemic Customer Engagement', I looked at some of the trends that were associated with the acceleration to digital service and digital payments post-pandemic. When people changed their physical behaviours, they changed their digital behaviours and by association, their financial behaviours.

Because customer interaction behaviour changed, so did their payment behaviour and borrowing. With customers moving to more digital-first interaction and digital self-service this has further driven the digital payments changes.
  • We all now tap and go in our local supermarket, using our existing credit cards, sitting in a digital wallet. ApplePay and SamsungPay would be big beneficiaries here. This behaviour is not going back to handing cash over a counter to an individual cashier. Indeed, many are reporting that customers would now actively switch from physical shops that did not offer this service. 

  • Online purchases are up so therefore online payments are up. Whatever digital payments infrastructure was in place is what was used. Mostly, companies will need to expand how they enable all their digital payment channels.
While loan products have been available for many years at the point of purchase the recent innovation is making these traditional loan products available in a digital point of sale locationMany of us now see a new addition to our digital check out areas which is the offer for a new kind of credit offer: buy now pay in four later instalments.  
  • BNPL Adoption: In terms of consumer behaviours and loans the last 18 months have shown a marked upturn in the adoption of the buy-now-pay-later (BNPL) model. The scale is breathtaking. The percentage of Gen Zers in the US using BNPL has grown six-fold from 6% in 2019 to 36% in 2021. Millennials' use of BNPL has more than doubled since 2019 to 41%. Gen Xers' adoption more than tripled, and even Boomers are getting into the act.1

  • BNPL payments compliance: The proliferation of BNPL has resulted in many people having multiple mini agreements in place. These often involve insignificant amounts of money, and missing one payment with some providers, has negative credit scoring implications for the consumer. A recent report by states that half of BNPL customers are late with their payments and this can result in overdue payment fees. Cornerstone Advisors found that 43% of customers on BNPL plans have missed a payment. Two-thirds of these customers that missed a payment just simply forgot it was due. Again, over half of BNPL customers have reported spending between 10 and 50% more than they would have if they were using a credit card. The advice for both customers and providers is clear: automate your payments process to minimise missed payments. For some types of BNPL there are also late fees, and when coupled with potential fees for failed direct debits, could outweigh the benefits of using the BNPL service at all.2

  • BNPL in customer journey: Depending on the type of product or service that is being evaluated by the customer, there may be different forms of credit available, and different terms. Right now, we are seeing a kind of "one size fits all" loan offer, but as with all things digital, the drive to personalisation is inevitable. Conversational interaction is a wonderful way to gather and evaluate additional information and through which to explain the terms of service in a manner that is understandable, compliant, and appropriate.

  • Focusing on automation: In Webio's interaction with clients, we see that there are many areas in a process that can benefit from automation. Conversational agents, or bots, are used to gather initial customer details; an identification and verification process can be run to authenticate; a budgeting process can be run to assess disposable income and affordability. These are all conversational automations that make the agents job a lot less burdensome, but which can be easily achieved with some API integrations. Processes where customers are presented with the correct or most appropriate card details; where the offer is personalised based on the details collected during the conversation, where the actual repayment schedule can be redefined, are all automations within the Webio platform.

  • Automation and the BNPL Journey: Webio's work in this area would suggest that many BNPL providers, and merchants using BNPL services, have not fully taken advantage of the power of automations to support the customer journey all the way through to ensuring the customer's adherence to the payments schedule. As explored earlier, missed payments, missed direct debits, and inflexible repayment schedules, are going to impact customer satisfaction with both the BNPL service and the merchant experience.

  • Expanding the lessons from BNPL: While there is a lot of interest in the BNPL offer, let us not forget that all manner of payments had to be delayed, rescheduled, or refinanced during the whole pandemic. These processes also involve automated ID&V, recalculating budgets, and disposable incomes, and finding the right payment arrangement. Being able to support regular credit card-based interactions over chat, messenger, SMS, and other digital channels certainly help, but you do also have to be able to adjust payment schedules, payment methods, and other aspects of loan financing to move with confidence into the post-pandemic landscape.
From Tap to pay, online payments, and BNPL customer journey offers, the need for credit and debt collection innovation is clear. However, the ability of companies to change the nature of their credit and collections conversations has never been more pressing.
Conversational interaction has enabled Webio clients to automate between 35% and 90% of typical BNPL customer journeys. We expect the number of conversations that become totally automated to significantly increase in 2022 as customers move to further embrace their digital transformation efforts in the area of credit and collections".
1.Buy Now, Pay Later: The “New” Payments Trend Generating $100 Billion In Sales by Ron Shevlin, Forbes
2. The Hidden Risks of Buy-Now, Pay-Later Plans by Penelope Wang, Consumer Reports

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