Head of content at Finextra Madhvi Mavadiya moderated panelists Julie Chatterjee, CCO at Multitude Bank, Christian Luckow, SVP of tribe lead and payments at Danske Bank, and Stefan Stignas, head of exploratory banking and strategic partnerships at SEB, in a discussion titled: ‘BNPL – are we entering a new era of commerce at POS and with embedded finance?’.

Mavadiya opened by asking a chicken-or-the-egg question on whether Klarna’s success is due to the Swedish fintech environment, or if Swedes are more inclined to use BNPL because of Klarna, of which the majority of attendees believed the latter.

Chatterjee explained that Klarna was a cultural fit to Sweden, and the cultural environment and spending habits of the Swedish people nurtured the company, along with the fact that Klarna capitalised on digitising a common spending practice. The idea, along with Klarna emerging when e-commerce was on the rise, was a combination for success, Chatterjee explained.

Stignas stated that banks were caught by surprise with Klarna’s rise to the top, and specified that the cultural differences explains why BNPL operates differently in different countries:

“In the Nordic countries, we are born and raised regardless of the of the innovation to sort of to pay what we owe to work that is and of course that is also embedded in the legislation. In the US, it’s a totally different culture. The average American does not pay what they owe, unless they really have to. The whole country is different and we can see with Klarna right now that it is costly for them to take it further.”

Lucknow agrees with Stignas’ point on varying payment mentalities, citing Denmark as an example, where debit cards are a preferred method of payment, and so BNPL is not a common way of purchasing, therefore Klarna is not as popular among Danish consumers.

Stignas said that Klarna and embedded services will pave the way for the future, and the UK is setting the scene when it comes to fintechs, but it also has the toughest regulatory geography in Europe, and what new innovations and regulations that will emerge will impact the global fintech industry.

Luckow spoke on who BNPL is benefitting and what challenges are coming up against BNPL:

“BNPL is just a tool in the toolbox, like any other financial instrument, it can make sense in the right setting or they can also be really detrimental if they are offered to people that we shouldn't have access to. The challenge is that, historically, it has been offered to people that probably didn't have the means to pay back the things that they bought using BNPL. There was a business model of earning as much as you could on the interest from payees, and that was the basis for quite a few of the market players. That has given BNPL a bad name that it doesn't necessarily deserve, because if used properly, it's quite a good alternative to other means of credit.”

Stignas commented that banks may be cautious to not be at the forefront of credit and BNPL, but data will be funding the process, and is critical.

Chatterjee described how Klarna rose to popularity as a checkout solution, and that struck a chord with the younger generation that banks can tap into. She detailed that incumbent banks can accelerate by taking notes from app-first fintechs that appeal to younger people:

“I think that incumbent banks need to look at spending habits and develop new types of offerings. We can see, the day Revolut comes out with a mortgage, how many youngsters will jump to that because they have a trust in that bank versus the incumbent banks. I think BNPL is a pretty easy way to the hearts of tech-savvy people and youngsters.”

Stignas contested Chatterjee’s point on the trust in incumbent banks, saying that very few people like their bank, but they do trust them because they have a legacy and are regulated. He compares traditional, reliable banks to an old, boring teacher that is a good one nonetheless. He emphasised that in this financial ecosystem everyone needs to find their part and banks will never disappear, they will coexist with fintechs.

The panel concluded with a discussion on AI’s impact on banking, highlighting that AI with hyper-personalise BNPL services, and can support financial institutions in catering products for customers, but will likely raise regulatory concerns.