If you’ve overlooked the growth in buy-now, pay-later (BNPL) because it looks like a simple rebranding of retail lay-a-way, or because you’re comfortable with your member credit portfolio already, you may be missing some of the bigger signals from both merchants and consumers. That was one of the key lessons shared by Tarik Camurdes, Buy Now Pay Later Executive at FIS, when he joined me on a recent episode of The CU Lab podcast.
He shared some other important insights on this trend that you should know about when considering BNPL.
- Buyers care about BNPL even though financial insiders know it’s an old concept. Traditional card payments are losing market share to the fintechs that have pushed BNPL into consumer consciousness. Fintechs are winning new business with BNPL by presenting it as a convenient option, delivered right at the point of purchase. And they’re making inroads on progressively smaller-ticket items.
- Not all BNPL offerings are created alike. There are several ways to implement BNPL. In addition to the checkout solutions major merchants and fintechs have made popular, in some markets major card issuers now offer pop-up installment payment offers right at the point-of-sale terminal. Converting card purchases to installment payments is a post-transaction BNPL method, and one which is also gaining significant traction among major issuers.
- Consumers value the convenience and credit score-friendly approach, and in many cases merchants are footing the lion’s share of the bill. Some savvy consumers recognize that BNPL extends their credit options without creating a conventional credit report inquiry. This diverts purchases away from traditional sources of interchange revenue. Meanwhile, in many situations, the overhead of the BNPL programs is largely being paid by merchants. This shift may put upward pressure on retail prices.
- BNPL’s new entrants are attracting regulatory attention. The new regulatory interest in BNPL is driven in part by the unregulated fintechs in the spotlight. While credit unions may not need to be particularly wary of the immediate potential for regulatory action, it’s important to recognize that the wider range of BNPL programs means that some members may be losing complete visibility into exactly what they owe and where they owe it. This creates an opportunity for credit unions to help members understand the impact of BNPL on their cash flow even while decisions about entering the BNPL market are ongoing.
- Credit unions are well-positioned to innovate in the BNPL space. Because credit unions have the financial well-being of members to consider, there is an opportunity for CUs to be a leader in finding mutually beneficial and sustainable solutions as BNPL continues to grow in prominence and volume.
To hear my entire conversation with Tarik Camurdes, listen to the complete episode here.