Buy now/pay later loans are a hot product category, but the fintechs that have dominated the market face a squeeze play from a potential government crackdown and new competition from incumbent card issuers.
This is the market that Nandan Sheth is stepping into as the new CEO of Splitit. Sheth is bringing his experience working with merchants on payments technology to his new job, as well as a less adversarial tone toward the financial establishment than some other BNPL fintechs take.
"We're not going to be a vanity brand," said Sheth. "We're bringing 'installments as a service.' "
Sheth has worked as both a fintech entrepreneur and payment industry executive. Most recently, Sheth was Fiserv's head of global digital commerce and head of the bank technology company's Carat business, which manages omnichannel commerce for multinational merchants.
Sheth was previously president and co-founder of Acculynk, which launched in 2008 and was acquired by First Data in 2017 (before Fiserv acquired First Data in 2019). Sheth was also co-founder of Harbor Payments, which American Express purchased in 2006.
As traditional financial institutions launch BNPL products and regulatory pressure builds on fintech-driven point of sale credit, Sheth is attempting to forge a path that works with traditional financial firms to offer BNPL. Splitit wants to operate mostly in the background as a white label provider, which differs from other BNPL fintechs that heavily rely on their own branding and promotion.
"We want to work hand-in-hand with issuers and networks to offer a contemporary experience for installments at checkout," Sheth said. Sheth, who is based in Atlanta, became CEO of Splitit at the end of February, replacing John Harper, Splitit's interim CEO since August 2021. Harper, who replaced Brad Paterson, will remain at Splitit through a transition period.
Splitit accesses unused consumer credit to fund BNPL. There's about $4 trillion available on credit cards, according to
Splitit uses partnerships with
"If you can embed a new payment capability in the existing flow at a merchant, the likelihood of success is greater," he said. "Merchants are looking for a cost-efficient method of payment and are looking to manage risk."
At Acculynk, Sheth helped lead the movement to bring PIN-debit payments to the internet, and this experience could help link BNPL to debit cards.
He "knows how all the moving parts fit together to build value," said Richard Crone, a payment consultant in San Mateo, California. "This working knowledge is in short supply in the BNPL market."
Especially beneficial is Nandan’s ability to improve Splitit’s merchant acceptance and the infrastructure required to minimize fraud and address consumer protections in advance of pending CFPB regulation, Crone said.
"What sets him apart is tolerance for integrating a fast-paced startup into a legacy business, especially attractive to any potential merger and acquisition candidates for Splitit," Crone said.
Sheth also worked on Clover, First Data's point of sale system. Clover was a key part of
In his previous jobs "we worked with different legacy BNPL providers and saw some things that drove me to this opportunity at Splitit," Sheth said. The prevailing BNPL model, driven mostly by fintechs, is to create new loans for every installment plan, according to Sheth. "That could be burdensome for consumers, especially when these BNPL plans
By operating as a white-label provider and working with existing credit relationships, the options for a credit card or BNPL payment are still there at the point of sale, but for the consumer and the merchant it flows through the same relationship and brand, Sheth said.
"I felt that having a variety of brands at checkout creates a 'Nascar' experience for consumers that creates more friction than is expected with a modern mobile commerce experience," Sheth said of multiple branded payment options at the point of sale that to him resemble the cacophony of ads on a race car. That causes "disenfranchisement," he said.
Higher inflation and general economic pressure will bring more consumers to BNPL loans, and this in turn will pressure BNPL lenders to provide an easy checkout experience that's also safe economically for the users.
By enabling BNPL through card rails, Splitit hopes to benefit from the expansion of
"As you think about the high cost of capital due to inflation, there will be more pressure on the BNPL industry," Sheth said. "We would like to see more issuers being relevant at the merchant checkout for point of stale installments."
The increased competition from traditional issuers is pushing diversification among
While Splitit pursues issuers and the BNPL fintechs add financial services, the Consumer Financial Protection Bureau is moving toward a potential regulatory crackdown on BNPL lending. Following pressure on BNPL in the
While BNPL is positioned as an alternative to credit card debt, regulators have grown concerned that the use of installment lending can have adverse impacts on consumers. Australia's
"The CFPB doesn't move quickly, but there will be some kind of statement coming," said Ginger Schmeltzer, a strategic advisor for retail banking and payments at Aite-Novarica in Decatur, Georgia.
Along with the credit bureaus adding installment lending performance to consumer credit reports, there is an increasing environment of scrutiny around BNPL lending, Schmeltzer said.
"Anything like a [more robust] credit check would create more steps at checkout. And an impact on a credit score could prevent consumers from setting up installments."
Splitit's model, which relies on accessing existing pre-approved credit card balances, should allow it to meet any pending CFPB or other regulatory action, Sheth contends. "We are not issuing new credit," he said.
