Galileo Expands BNPL for Small Businesses with Mastercard
In today’s challenging financial landscape, small businesses often find securing the funding they need cumbersome. Galileo Financial Technologies, LLC is approaching this issue in partnership with Mastercard. This article explores how Galileo’s Buy Now, Pay Later (BNPL) offering, extended to small businesses via Mastercard Installments, is set to revolutionise the lending landscape for SMEs.
Small businesses, especially sole proprietorships, play a crucial role in the economy, but accessing loans, even small ones, can be daunting. David Feuer, Chief Product Officer of Galileo, points out the hurdles that small and medium-sized businesses (SMBs) face when dealing with traditional lenders. These hurdles often include complex application processes, prolonged waiting times, and no approval guarantee.
To tackle these challenges head-on, Galileo, an independent entity under SoFi Technologies, has teamed up with Mastercard to offer a simplified and efficient BNPL solution for small businesses. This partnership allows banks and fintech firms to provide SMBs with flexible instalment financing options. The key differentiator here is the data-driven approach, primarily utilised by banks.
With their access to vast amounts of financial data, banks can now offer SMBs proactive BNPL loan options. Banks can tailor their offers by analysing a company’s financial health and repayment capacity. This innovative approach allows banks to provide BNPL loans to SMBs before they even approach the bank for financial assistance.
The Galileo loan management platform further streamlines the process. It enables lending clients to oversee the repayment schedule and disbursement of loans to virtual cards running on the Mastercard Installments program. These virtual cards serve as versatile payment instruments, allowing SMB owners to use their loans where they are needed most. Typically, payment terms mirror retail BNPL structures, with standard terms including four payments with 25% due upfront.
The partnership between Galileo and Mastercard benefits not only SMBs but also the lenders themselves. Banks already have an established customer base, with many sole proprietorships being existing consumers and households with checking and savings accounts. These customers are now ready to transition into small business banking customers, attracted by the advantages of BNPL financing, especially in an environment where interest rates remain high.
SMBs are no strangers to Buy Now, Pay Later, with a significant percentage of consumers utilising this financing option. Research has shown that more than a quarter of individuals have used BNPL recently. Hence, small businesses expect consumer-like experiences in their financial transactions, making this the ideal time to integrate BNPL more firmly into the small business sphere.
Regarding risk management, banks are uniquely positioned as they comprehensively view an SMB’s cash flows, income sources, and bill payments. Leveraging this data, banks can create tailored risk models that help target SMBs proactively with BNPL options. Unlike impulse buys associated with BNPL, this approach fosters a responsible relationship by giving businesses liquidity when needed.
Feuer predicts banks will further customise BNPL terms, potentially moving beyond the standard four-payment structure. The data for offering BNPL solutions can also strengthen the banking relationship, potentially leading to revolving lines of credit or other tailored products.
Ultimately, this partnership between Galileo and Mastercard aims to offer small businesses services throughout their entire lifecycle, ensuring that lenders can maintain a solid and enduring relationship with their customers, regardless of their growth stage.
In conclusion, Galileo’s expansion of its BNPL offering in collaboration with Mastercard presents a significant leap forward in simplifying the lending landscape for small businesses. By harnessing data-driven insights and a proactive approach, this partnership empowers SMEs, allowing them to access much-needed funds promptly and efficiently. In an economy where adaptability and agility are essential, this initiative provides small businesses with a vital lifeline to support their growth and success.
