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Credit card: one product for two very different customer segments.
Transactor- uses CC as a safer & more rewarding payment tool. Doesn’t pay interest or most fees.
Revolver- uses CC as a flexible and convenient credit tool. Pays interest and some fees.
Transactor- uses CC as a safer & more rewarding payment tool. Doesn’t pay interest or most fees.
Revolver- uses CC as a flexible and convenient credit tool. Pays interest and some fees.
Issuers make 
from transactors through merchant fees (interchange) and the theoretical ability to cross-sell other products.
They have the same revenue sources for revolvers + interest and fees. However these customers are obviously much riskier.
from transactors through merchant fees (interchange) and the theoretical ability to cross-sell other products.They have the same revenue sources for revolvers + interest and fees. However these customers are obviously much riskier.
You can apply a similar framework in BNPL/POS Lending.
Transactor- uses BNPL and POS loans as convenient payment tools and a way to maximize time value of money (0% interest).
Revolver- uses BNPL and POS loans as a convenient and accessible credit tool (especially BNPL).
Transactor- uses BNPL and POS loans as convenient payment tools and a way to maximize time value of money (0% interest).
Revolver- uses BNPL and POS loans as a convenient and accessible credit tool (especially BNPL).
BNPL/POS lenders make from transactors through merchant fees and some interest (more on POS lending). Also a highly theoretical ability to x-sell.
For revolvers, it’s all those same revenue sources (more from interest) + consumer late fees. And again, they’re riskier.
from transactors through merchant fees and some interest (more on POS lending). Also a highly theoretical ability to x-sell.For revolvers, it’s all those same revenue sources (more from interest) + consumer late fees. And again, they’re riskier.
Credit Cards vs. BNPL vs. POS Lending
Transactors- merchants subsidize these consumers regardless, so they prefer subsidizing lower abandonment rates in their funnels rather than rewards for consumers (+BNPL/POS). However, these consumers LOVE rewards (+Credit Cards).
Transactors- merchants subsidize these consumers regardless, so they prefer subsidizing lower abandonment rates in their funnels rather than rewards for consumers (+BNPL/POS). However, these consumers LOVE rewards (+Credit Cards).
Credit Cards vs. BNPL vs. POS Lending
Revolvers- in addition to convenience, these consumers highly value access to liquidity (+BNPL), but serving these customers profitably requires strong risk management (+ Credit Cards & POS).
Revolvers- in addition to convenience, these consumers highly value access to liquidity (+BNPL), but serving these customers profitably requires strong risk management (+ Credit Cards & POS).
By the way, if you need a primer on the differences between BNPL and POS Lending, check out @mikulaja’s newsletter. https://fintechbusinessweekly.substack.com/p/buy-now-pay-later-vs-pos-lending
IMHO- POS Lending and BNPL are fairly well designed for transactors, but providers will need to keep working on breaking their addiction to rewards.
BNPL, with its convenience & limited credit underwriting seems like a popular, but ultimately poor fit for revolvers.
BNPL, with its convenience & limited credit underwriting seems like a popular, but ultimately poor fit for revolvers.
Caveats:
-I know a lot of this is based on gross generalizations. There’s lots of gray area between a transactor and a revolver.
- This is based on the limited data and analysis I’ve seen, but the BNPL craze is still new and there’s a lot of data we don’t have yet.
-I know a lot of this is based on gross generalizations. There’s lots of gray area between a transactor and a revolver.
- This is based on the limited data and analysis I’ve seen, but the BNPL craze is still new and there’s a lot of data we don’t have yet.
But as @mikulaja pointed out, it’s important to start drawing distinctions in this space rather than treating it all as a monolith.
Distinction between POS loans and pay in 4 is important.
I also think it’s important to start thinking of customers in distinct segments.
Distinction between POS loans and pay in 4 is important.
I also think it’s important to start thinking of customers in distinct segments.
