Speaking with Finextra on the announcement, CEO of Openbank and Santander Consumer Finance, Ezequiel Szafir, explains that this launch is particularly significant for the industry as “it’s the first time we see an incumbent bank getting into a field that has been, until now, totally owned by fintechs and with this kind of early success.”

Zinia was not built overnight, Szafir explains. The project was developed by Santander’s Digital Consumer Bank (DCB), which is a combination of sorts between Santander Consumer Finance (SCF) and Openbank - Santander’s digital bank - over the past few years.

The BNPL product, which has been rolled out in Germany over the past nine months, has welcomed over two million customers into the fold. “That’s fintech numbers,” Szafir observes.

The decision to pursue Germany first, Szafir adds, is because “as a bank, we follow our retailers, customers, and partners. A number of important retailers were asking us for BNPL products.”

Should fintechs be "scared” of Zinia?

Already present in 18 countries, Santander Consumer Finance services 19 million customers and 63,000 affiliated merchants. This places Zinia in a unique and powerful position to begin growing organically through its existing footprint.

“This is what I call a super unfair advantage. The moment banks start behaving like fintechs should be scary for fintechs, we’re doing that, and fintechs should take notice.”

Rather than describing this entry into BNPL as a defensive move by Santander to reduce the threat of BNPL players taking precious market share, Szafir explains that this BNPL product is just one aspect of an overarching “offense strategy” to re-calibrate the bank as a formidable competitor to digital newcomers.

“Santander Group is the only group - that I know of - that took the fact that we needed a new fintech-type technology stack quite a few years ago. For the last five years, we’ve been investing and developing Openbank extensively.”

The Zinia launch was therefore the result of Santander being ready to deliver when its customers began asking for a that service. “Compared to other banks that don't go where fintechs go, because they cannot, we decided that we were going to take them on.”

The two key reasons for slow response from incumbent banks on the BNPL front are regulatory challenges and technology. “The large BNPL players have been able to provide these services in ways that banks simply cannot due to regulation. For example, banks are obliged to carry out responsible lending, to check affordability, to protect private data. BNPL players have been regulated in a different way.”

He notes that fundamental issues with legacy technology has rendered financial institutions unable to compete.

However, the reason Santander is striving to “get into fintech” in ways that other banks aren’t is because it has the luxury of access to agile technology while remaining a bank. “We command a trust that fintechs don’t have, because we are actually following strict rules.”

With increased regulatory pressure building in the sector, certain BNPL players may soon feel the squeeze, believes Szafir. He predicts that a number of fintechs will fail, as they won’t be able to produce sufficient income while juggling the added pressure of regulatory obligations.

“I would bet against most of them, not all of them. But that’s a bet for venture capitalists to take.”

The same goes for banks. “Some banks are in denial, but you can easily see which banks are not in denial about these digital threats […] I think you will see weaknesses emerge on both sides.”

Circling back to the point on trust, he notes that Santander has an “unfair advantage” compared to fintechs, given the bank’s long established history and familiarity with regulatory process.

Perhaps alluding to Klarna’s unfortunate data breach in May 2021, he adds: “This means we are turning regulation into an advantage. The fact that we’re regulated instils trust in our partners. They know that we’re serious, that there won’t be hidden fees and that their data will be protected.”

Despite the fierce surge in BNPL across the globe over the past 24 months, Szafir believes that BNPL is more likely to be a wake-up call to the industry rather than revolutionising our approach to credit.

“It’s just another way to pay, so I don’t think it’s revolutionary per se. It indicates an end of an era where incumbents are slipping - in denial, and fintechs are winning.”

“If all banks do what Santander does,” he warns, “wow, fintechs should really take notice.”