A Buy Now, Pay Later Provider Review for Credit Unions

Typically, Buy Now, Pay Later (BNPL) is an option that allows consumers to make installment payments on purchases over $100. There’s a quickly growing demand for it.

However, credit unions are slow on the uptake here. Most BNPL payments go through fintechs, cutting credit unions out of income and member experience opportunities.

Read on to see a few major BNPL trends, a review of BNPL providers, and our picks for which fintechs would make the best partners.

See cutsheets here for equipifi and Quilo, our two currently recommended solutions.

 

Buy Now, Pay Later Trends

A cursory Google search will reveal hundreds of individual Buy Now, Pay Later statistics. Here, we’ll focus on a few trends that should catch any CU exec’s eye:

  1. By 2026, about a quarter of all digital purchases are expected to be made in installments. That number was ~9% in 2021, which itself was a massive increase over the year before it. Without a BNPL option, credit unions will lose these payments to fintechs and competitors.
  2. S. BNPL volume could increase 15x by 2025. In 2020, total BNPL payment volume was $24b. In 2021, that volume surpassed $100b. BNPL use is accelerating fast. More importantly, it’s increasingly common for POS purchases, too.
  3. Financial institutions are losing money to BNPL fintechs. In 2021 alone, banks are estimated to have lost about $10b in revenue to BNPL providers. Many major banks will introduce BNPL products in 2022. Credit unions will have stiff competition from fintechs and banks alike.

The picture is clear:

Buy Now, Pay Later will continue to grow. And, while regulation will certainly increase in the coming years, so will BNPL payment volume and demand. Credit unions must join the movement or risk losing more revenue to competitors.

 

A Review of Buy Now, Pay Later Providers

In this section, we’ll include a brief alphabetical list of the major BNPL providers. However, we’ll start with 3 providers that partner with credit unions.

Why?

Because the rest of the list are, for the foreseeable future, direct competitors. If you want to provide BNPL payment options to your members without pushing them toward PayPal, e.g., then you’ll need to look at the top of this list first.

1.   CO-OP Financial Services

A known quantity and one of the industry’s leading CUSOs, CO-OP, is debuting its Pay-Over-Time Transactions product this year to help credit unions compete against competing fintechs. We expect this to be a solid option when it drops, but we have our reservations about whether their product will be as mature or flexible as other options on this list.

2.   equipifi

equipifi powers financial institutions to offer BNPL to their members through their existing debit card and online banking platform. We recommend equipifi due to its core and online banking integrations. This allows FIs to leverage the checking account and relationship data to offer more and higher quality loans, increase interchange, and drive net new interest income. Their CEO, Bryce Deeney, spent years as VP, Payments at Alaska USA FCU, so you know they know credit unions.

3.   i2c

i2c is a fast-growing Banking-as-a-Service (BaaS) provider that offers solutions for BNPL, cryptocurrency, card issuing, and more. Although they’re a solid organization, due to their size and large product offering, credit unions may not find them as responsive or CU-focused as equipifi or Quilo for BNPL-specific needs.

4.   Quilo

Quilo enables community banks and credit unions to originate and service instant installment loans, providing account holders with immediate access to funds and no hidden fees. These loans can be used for BNPL, debt repayment, or account replenishment after purchases. Quilo is our pick for a non-BNPL-specific solution for credit unions.

5.   The Rest of the Buy Now, Pay Later Fintechs

Currently, these fintechs provide BNPL to merchants and consumers, but they compete directly with credit unions, making them poor partners. This list is illustrative, but not exhaustive. If you think we’ve missed one that deserves mention, please let us know!

Affirm is one of the largest BNPL providers in the U.S. Like most on this list, they manage the purchase and then bill consumers for the purchase amount in installments.

Afterpay was recently acquired by Square (Block), and it’s still one of the leading BNPL providers in the U.S. with over 2,300 major retail partners and counting.

Klarna offers merchants and consumers BNPL capabilities, as well as shopping opportunities and a loyalty program (complete with a deposit account and card).

PayPal launched its Pay In Four product recently and provided it for free to all of its existing merchants, quickly making it the largest BNPL provider in the country.

Sezzle is a BNPL provider operating in the U.S. and Canada. They offer installment payments on large purchases and provide shopping with partner brands through their website.

Splitit works differently from the other BNPL fintechs in that it doesn’t require consumers to take on new financing—instead, partnered merchants charge a portion of the purchase price until the item is paid off.

Zip (formerly Quadpay) links to a consumer card and provides BNPL payment options through its app.

 

Recommendations

Typically, we avoid giving actual, direct recommendations. We’d rather provide information about companies and trends and let you draw your own conclusions.

However, we’ll risk going off-brand here:

Look into euqipifi and Quilo. Ask them questions. Book a demo.

Why?

Because an increasing number of members are using BNPL. They’re disintermediating your credit union in the payments process, and you’re losing income from it.

Also, not all BNPL options are strictly safe for consumers. If you set the terms for BNPL through your credit union, you can ensure your members’ financial wellness.

 

Additional Resources

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