Algoan: a French solution to make BNPL responsible

Algoan, a fintech pioneering credit decisioning and the democratization of access to credit, has just launched an algorithmic solution for automatic solvency analysis, offering a response to the risk of excessive indebtedness linked to the exponential development of BNPL ("Buy Now Pay Later"), already adopted by fractional payment players such as Pledg.

BNPL ("buy now, pay later"), in parallel with the rise of e-commerce sites, is experiencing strong growth in Europe and a real boom in France. Easy buying, with no budgetary considerations, makes the explosion of this practice, which is not yet regulated in France for repayment periods of less than three months, dangerous, even pernicious. Figures from the UK show how BNPL can be a factor in over-indebtedness: over 20% of Britons who took out a BNPL loan to finance their Christmas shopping in 2020 were unable to meet their repayments or had to borrow money to do so (source: www.yourmoney.com). While a new European directive is currently being prepared to regulate the subject and require systematic creditworthiness analysis, its implementation could take one to two years. Yet there is an urgent need to encourage all stakeholders to grant BNPL loans responsibly. To this end, lenders should not be content with the payment details (bank, card number, etc.) of the prospective borrower, but should offer a comprehensive analysis of the borrower's financial situation. Algoan's technology makes this possible. Entirely based on Open Banking and relying on a dedicated state-of-the-art algorithm (known as "micro-clustering of bank transaction data"), the Algoan Credit Insights tool automatically assesses the borrower's residual assets and indebtedness, and thus his or her eligibility for BNPL. On the customer and e-retailer side, the process is perfectly transparent: all the customer has to do is give their consent for read access to their bank accounts, and the lender delivers instant approval. Pledg, a fintech specializing in fractional payments, chose not to wait for the new regulatory directive before integrating Algoan's solutions. For payment terms of less than 3 months (currently outside the scope of the Lagarde law), consumers will soon be able to connect their bank accounts to check their creditworthiness. A first in Europe.

"At a time when credit institutions are communicating about responsible consumer credit practices, there is no valid reason for BNPL to lag behind, even if regulations do not yet cover repayment periods of less than three months. The development of e-commerce cannot be achieved without protecting the French from overindebtedness. This is all the more true today, when there is an adequate technological offering that makes solvency analysis and a smooth customer experience compatible. Open Banking, coupled with the Algoan solution, enables us to identify whether a prospective borrower is creditworthy in a very short space of time. The system can be installed at any lender in just a few weeks. It would therefore be possible to equip all BNPL players with this new enlightened granting solution before the Christmas shopping rush, to protect the French from the risk of ending the year over- or under-indebted," says Paul Peyré, from Algoan.