LAS VEGAS — U.S. Bank stepped into the buy now, pay later space Tuesday with the launch of Avvance, a new point-of-sale lending product.
Similar to other BNPL checkout experiences, an Avvance button will now pop up at checkout on the websites of participating retailers, which Rob Seidman, the bank’s chief product officer for point-of-sale lending/BNPL, said was an “actively growing” list of merchants.
Customers can choose to pay with Avvance by inputting basic credit information, such as name and address, at the checkout phase of a transaction. They will then find out what annual percentage rate they qualify for — depending, as well, on the term of their loan, which can range from three to 60 months.
“We at U.S. Bank have all the natural assets to make a really competitive offer in the space, and our merchants have been asking us for it,” Seidman told Banking Dive at the Money 20/20 conference. “We have the merchant base, a lending business that we've been in for [more than a] hundred years, an award-winning servicing arm and mobile app infrastructure set up to do consumer lending at scale that is different and apart from other fintechs.”
“You put all this together and it makes a compelling reason and story why U.S. Bank decided to get into it,” he said.
BNPL has grown in popularity as a payment option in recent years. The Federal Reserve Bank of New York reported last month that 19% of 1,000 consumers it surveyed in June have used BNPL loans within the past year, and take-up rates register across financial profiles: 14.6% of those surveyed with an annual income above $150,000 have used BNPL, as well as 24.3% with an annual income of under $30,000.
The average BNPL customer, according to Bankrate, has four concurrent BNPL loans.
Alternative to credit card
Point-of-sale lending products like Avvance fill a particular need: to address cost-heavy, one-time purchases, such as replacing an air conditioner at a time when opening a credit card to foot that bill might not be “so easy … to open on the spot,” Seidman said.
“Point-of-sale landing offered by your merchant: It's real time, it's incredibly fast. It's easy to use. It's private and confidential, so it becomes a viable alternative to opening a credit card and using it; and you also know it's a one-time deal, so you control your spending,” he noted.
Seidman’s team “started in earnest” to develop Avvance in December, a quick turnaround for a product launch at one of the nation’s largest banks. Seidman, though, came from the hastier world of fintech — Minneapolis-based BNPL provider Sezzle. Before that, he worked at a fintech acquired by Ally Lending.
U.S. Bank “has all the natural pieces in place to do it in a way that will differentiate us in the market, and that's the key,” Seidman said.
“We think the demand from our merchants and the trend with consumers is persistent, and we think it's here to stay,” he said. “The convenience of it is it's really incredible — it’s just an excellent product in the right circumstances.”