By Ray Birch
RANCHO CUCAMONGA, Calif.—As Co-op Solutions finalizes its buy now, pay later (BNPL) solution for credit unions, the CUSO is saying the fast-growing payment alternative will likely serve credit unions best as a member retention vehicle.
“As much as it can be an acquisition vehicle, we're looking at this as a big retention play,” said Nelson Fisher, director of product development at Co-op. “This is a means for CUs to really deepen and further relationships with members.”
In a market in which players such as Klarna, Afterpay and increasingly, Apple Pay Later, are succeeding in getting between members and their credit union financing options, the new BNPL option will offer an effective strategy to keep members from straying.
“Besides being a product that is in demand, BNPL is just another means of providing that additional financial resource to members,” explained Fisher. “The credit union can say it has digital issuance, it has P2P, and now it has buy now, pay later.”
The solution also contributes to making credit unions relevant to members, Fisher added.
“This is a means for us to help credit unions provide that level of service consumers are expecting,” said Fisher, who added Co-op’s solution, called Pay Over Time, is expected to be available by the end of the year.
How it Works
Pay Over Time is tied to a credit union’s credit card. With the touch of a button adjacent to a payment listed on the credit union’s mobile and online banking applications, the charge can be converted, for a “nominal” fee paid to the CU to a series of payments.
“Our product offers different payment programs—three months, six months, nine months, 12 months, up to 72 months. It’s dynamic and completely up to the credit union. They can then make the choice based on what makes the most sense for them,” Fisher said.
Co-op is finalizing beta-testing for Pay Over Time with a credit union client.
“We're getting it up and running, really ensuring that it is built for credit unions,” Fisher told CUToday.info. “We're going to have a very credit union centric product.”
‘Not Going Away’
Nelson Fisher
Fisher reminded that BNPL’s growth trajectory remains high.
“In general, we're upwards of 360 million users worldwide, as of the end of 2022,” said Fisher. “And that number has grown pretty dramatically since then. If I look at our projections and what we're looking at for BNPL usage, we're looking at upwards of 900 million users by 2027. Within the next four years the number of BNPL users worldwide will double. The BNPL market has a cap of roughly about $725 billion by 2030. This is not going away.”
Fisher emphasized that growth projection will not be impacted by the CFPB’s increased focus on buy now, pay later, nor by data showing increased delinquencies among users of BNPL financing.
“I think the regulatory bodies recognize and really understand this is another method of extending lines of credit to members and consumers,” Fisher said.
Fisher said each credit union will have to decide how aggressive or conservative it wants to be in underwriting its BNPL offering.
At Top of Mind
In addition, he stressed that giving members a BNPL option keeps the credit union current in the mind of the membership and also helps them with their finances, giving them another option. He emphasized that is a strong way to strengthen relationships.
“The credit union, then, is driving that digital maturity. They're driving that that relationship with me,” Fisher said. “This becomes just another leg in a credit union’s digital maturity, saying this is where our credit union is headed.”