About Buy Now, Pay Later: Post-Purchase

Galileo’s Buy Now, Pay Later(BNPL): Post-Purchase* offering enables your customers to turn eligible settled transactions on credit and debit cards into an installment plan or loan. Like Galileo’s other lending products, you have strong flexibility in how you design your post-purchase BNPL offering, including the number of installments, frequency of repayment, fees, etc. to meet your business requirements.

Here is an overview of how BNPL: Post-Purchase works for both debit and credit accounts:

The customer uses their credit or debit card to make purchases.
Customer reviews settled transactions and selects up to five transactions to move into a BNPL: Post-Purchase plan or loan.
You present an offer and terms of agreement in your mobile or web application.
If the customer accepts the terms, Galileo validates that the transactions are settled and not tied to any existing installment loans.
Galileo creates the loan for the sum total of the selected transactions.

For debit transactions, you disburse the funds to the customer’s Galileo DDA or an external account.
For credit transactions, the amount is transferred to be paid off in installments that align with the customer’s credit card payment due date.

The customer pays down the plan or loan in installments at the defined schedule in the offer.

Differences between debit and credit account transactions

There are some key differences between debit and credit account transactions that are important to understand when designing a post-purchase BNPL offering.

Debit

For debit account transactions, post-purchase is an installment loan that disburses the full purchase amount back to the customer’s DDA. The customer makes repayments at the set schedule, reducing the balance at each payment, until the balance of the loan is paid off in full. You must have a lending license because you are offering a loan to the customer.

Use case
A family is looking to replace their combo washer/dryer unit with separate units. They found an exceptional deal for their washer at Home Value Plus, and they have a coupon for a discount at Best Electronics Warehouse where they found a dryer. While they have the funds, they recently had an unexpected expense and would benefit from having cash available in the short term. They decide to take advantage of your combined BNPL: Post-Purchase offering to manage the payments over time rather than all at once. They make the two separate purchases with a debit card issued by you. After the transactions settle, they select both transactions and convert the total into a BNPL: Post-Purchase loan with four equal payments with no interest. Once the loan is created, the amount of the transactions is disbursed back to the DDA, freeing up the funds to use for other expenses. The customer is able to view the repayment schedule in their banking mobile app and track their progress over time.

The dryer breaks one week after installation by a licensed professional. They file a dispute. Since the purchase was made with a debit card, the customer is likely protected by Regulation E.

Credit

For credit transactions, post-purchase BNPL moves settled transactions from the credit balance to an installment plan with fixed fees and no interest. The installment plan is a separate repayment schedule from the monthly credit card repayment. The repayment dates for both the installment plan and credit card should align. Generally, this is a fixed day of the month. Aligning the date of the BNPL: Post-Purchase plan with the credit card repayment schedule ensures that the customers don’t have multiple repayment dates in a given month.

Unlike debit transactions, no funds are disbursed, meaning that the customer’s available amount to spend on their credit card does not increase. This is why this is considered an installment plan, not an installment loan for credit transactions.

Use case
A young adult unexpectedly runs into car trouble and learns the car needs an expensive transmission repair. This is a significant expense they were not planning for and they do not have the cash funds to cover it. As a result, they must put it on their credit card. Concerned about not being able to pay it off at the end of the month and accruing interest, they decide to take advantage of your bank’s BNPL: Post-Purchase offering. They agree to four equal payments over eight weeks with fees. This gives them plenty of time to manage the payments and help avoid rack up credit card debt.

What Galileo provides

From Galileo you can expect for BNPL: Post-Purchase programs:

Loan management — Loan creation with payment schedule, repaid in installments.
Posted Transactions RDFs to determine the settlement ID and association of the settled transactions the customer wants to turn into a BNPL: Post-Purchase plan/loan.
API endpoints to manage the loan from creation to charge off, including but not limited to creating the loan, creating payments from a Galileo or external DDA, and retrieving the status of active loans and future installments.
Daily files for loan reconciliation. Galileo offers three daily reporting files exports:
- Daily Loan Status — List of the current loans, subproducts, statuses, and installment due dates.
- Daily Transaction — Details on daily transactions related to loans.
- Daily Loan Installments Status — Details on the status of the installments.

Your responsibilities include

Galileo debit and/or credit card program.
Customer experience of BNPL: Post-Purchase in your web and/or mobile application, including how to display the list of eligible, settled transactions to your customers.
Define the loan subproducts to customize your offering including repayment schedule, fees, minimum and maximum amounts, etc.
Acquire lending licenses and other regulatory requirements, including terms and conditions of offers.
How to handle debt facilitation.
Developing necessary terms and conditions/cardholder agreements.
Define underwriting and customer qualifications.
Determine how to handle delinquent and defaulted loans, and collections methods.

See Setup for Installment Loans for details on these responsibilities for running an installment loan program.

*Programs with over four installments or whose customers are incorporated businesses rather than consumers, may be subject to additional lending regulations and consumer protections, including Regulation Z and state lending laws. You assume all risk and liability arising from your use of Buy Now Pay Later solutions and are solely responsible for compliance with applicable federal, state and local laws, regulations and judicial and administrative decisions, including but not limited to, any applicable state and federal commercial lending laws.