This is an excerpt from the article published in The Asian Banker.

Credit analysis remains a key success factor in BNPL

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A key differentiator for a successful BNPL will be the institution’s ability to do advanced credit analytics and control defaults. Fintech companies focus on the integration of multiple data sources in the ecosystem along with an advanced risk assessment engine and the use of machine learning and artificial intelligence (AI) algorithms.

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In some emerging economies where the credit bureau data is limited, there is a greater need for proprietary data pipes and non-traditional data to develop credit scores. Several fintech companies target this segment.

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For instance, Credolabs is a fintech that uses   smartphone and web metadata to help lenders and businesses underwrite.

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“A lot of BNPL players face the issue of significant data asymmetry between scorable and unscorable populations, lack of data and thin files from credit bureaus. We bring a completely new set of data that improves the overall predictiveness of the lenders’ existing models,” said Peter Barcak, CEO and founder, CredoLab. He added that as this data has little co-relation to the credit bureau and other traditional data, it provides a complimentary solution to get a 360 degree assessment of applicants.

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Besides a strong risk assessment capability, other critical success factors for BNPL companies include access to multiple credit capital and funding partners, having a wide merchant network and the ability to provide a differentiated customer experience.

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Read the entire article here.