By Ray Birch
ST. PETERSBURG, Fla.—If credit unions look closely at their payments data they will likely be “shocked” at the number using buy now, pay later (BNPL), according to PSCU, which believes that in the near future BNPL will become table stakes in a CU’s payments mix.
“I read that somewhere around 30% of consumers are planning to use buy now, pay later for back to school supplies,” shared Cody Banks, managing vice president of payments, fraud and loyalty at PSCU. “We pulled some analytics reports together for our clients, and when we do all of them give us the same response, which is they are shocked at how many of their members are already using buy now, pay later.”
For example, PSCU reviewed data from an “average size” CU.
“We pulled their merchant data for Affirm, Klarna and AfterPay and it was pretty telling,” he said. “We saw almost 15,000 transactions a month going to one of those providers, totaling almost a half-million dollars in revenue or transaction amounts. Then, we broke it down by who was using it. About 60% of those using it were younger generations—Millennials and GenZ. About 40% were Baby Boomers and Gen X. What that tells us is your members are using this. Whatever your opinions are of BNPL, you need to meet them where they're at.”
What the Forecast Suggests
The volume of BNPL payments rose 70% in 2022 and forecasts call for a 25% increase this year, to $100 billion, Banks said.
“With the Amazon Prime Day, Black Friday and Cyber Monday this year, a huge chunk of those sales, $11 billion, were done with buy now, pay later,” Banks said. “When we dig into the data it just continues to show the growing appeal of BNPL. Your members are already doing this. Any of the folks who are out there saying this is a fad and it’s going to go away…I always challenge them to look at the data.”
Digital Centric, Digital First
That kind of data, Banks emphasized, led PSCU to introduce is BNPL offering. Last year the CUSO launched its BNPL “post-purchase” offering.
Cody Banks
“It is very digital centric and digital first,” Banks said. “Get into your accountant and tag a purchase for buy now, pay later. We've had some really great buzz around it. We've had probably 100 or so credit unions enroll or are in line to enroll.”
Banks believes BNPL helps members budget better, adding that since the arrival of COVIC consumers have become much more conscious of managing their monthly payments and credit score.
“The central core of why credit unions exist is to help people meet their financial needs and provide them financial wellness opportunities,” he said. “If we can pair those two together and make sure that folks are educated about using credit and BNPL…Let’s say you're looking to make a big purchase, maybe redo your kitchen or bathroom. Let's work on how we can budget that together and tag that as an installment loan versus going to one of the card brands.”
Enhancements Coming
Within the next 12 months, PSCU will be making enhancements to its BNPL offering to allow for more flexibility, Banks explained.
Those enhancements include things like “being able to tag purchases over multiple statements cycles, being able to bundle purchases together for BNPL,” he said. “For example, you are redoing your living room (and) you buy a couch and a TV—bundle those two purchases together. And the purchases may be from different places. Those are the types of things that we're working on to make our existing product even better, based on feedback we're getting. We're also exploring debit.”
The Trend Among the ‘Less Loyal’
Banks believes BNPL is going to be a normal payment method in the next three to four years.
“Whether it's an option at checkout or a tool to budget better…The younger generations will continue to use it, those who, frankly, are a little less loyal to the traditional banks and are more used to open banking,” he said. “Buy now, pay later, will just become table stakes, just like digital issuance, just like being part of the digital wallets. I don't see this going away. So, I think if we want to compete, and credit unions want to be relevant—especially to the younger generations—buy now, pay later will have to be part of their portfolio.”
How to Lose Members
Credit unions that don’t act will risk losing members, especially younger ones, Banks continued.
“As we look to build that holistic digital experience, from beginning to end, I think it just becomes part of the payment ecosystem,” he said.
When CUs deploy BNPL, they can’t take that step without strong marketing and member education behind the move, Banks said.
“The proof is in the numbers. We're seeing really good traction by those credit unions that have deployed BNPL and paired it with marketing campaigns, especially around those peak season times like the holidays, back to school, Amazon Prime Days. We just want to make sure we remind folks it's available,” Banks noted.