24 THE NAFCU JOURNAL NOVEMBER–DECEMBER 2022 merchants or working with merchants through a third party, said Camurdes. “In the U.S., larger financial institutions are providing BNPL or installment services by offering to convert specific purchases made on a consumer’s credit card to an installment payment plan,” he said. “This is the easiest way to offer the service because it is not a new product, the credit union can set eligibility requirements to minimize risk and it lives in your own environment so you maintain the member relationship.” The offer to convert can be made to members with good payment history and the offer can be limited to purchases over a certain amount, he added. Adding a BNPL feature to the credit union member’s existing card or through a new product specifically designed for short-term installment loans is a low risk service for existing members, said David Javitch, vice president of product management at Mastercard. “This is also a product that can be used to attract new members,” he said. “We’ve found that as the popularity of BNPL grows, over 60% of people interested in it prefer to use it through their financial institution versus another organization.” “ It’s a challenge to develop new and innovative digital services, but there are tools and technology providers who can bring partners together to create the product more easily. The goal is to demystify the process so credit unions of all sizes can offer a BNPL experience over time. ” DAVID JAVITCH, VICE PRESIDENT OF PRODUCT MANAGEMENT, MASTERCARD “ Passing up the opportunity to offer this innovative product runs the risk of losing members and revenue to fintechs or other institutions offering it. We tell credit unions to evaluate it carefully to decide if it is right for their organizations. ” PAUL DAVIS, DIRECTOR OF MARKET INTELLIGENCE, STRATEGIC RESOURCE MANAGEMENT Reaching a new audience is a benefit of BNPL. Younger shoppers appreciate the flexibility, with 44% of Gen Z and 37% of millennials expected to use BNPL in 2022, compared to 23% of Gen X and 9:4% of baby boomers.2 In spite of the greater interest in BNPL by younger people, the product can also be attractive to previously underbanked persons as well as older, affluent members who are purchasing big ticket items, said Paul Davis, director of market intelligence, Strategic Resource Management. “Passing up the opportunity to offer this innovative product runs the risk of losing members and revenue to fintechs or other institutions offering it,” he said. “We tell credit unions to evaluate it carefully to decide if it is right for their organizations.” In addition to providing a new revenue source from individual members, Davis foresees a potential opportunity in the business-to-business space. “Purchasing office equipment, construction tools and other big-ticket items via BNPL can be a significant benefit to small business members.” The demand for BNPL will continue to rise consistently over the next three to four years, said Javitch. “It is a challenge to develop new and innovative digital services, but there are tools and technology providers who can bring partners together to create the product more easily,” he said. “The goal is to demystify the process so credit unions of all sizes can offer a BNPL experience over time.” Doing your homework is important to evaluate what members want, how risk can be mitigated and how it can support a credit union’s growth. Camurdes recommended that credit unions talk to existing credit and debit processing partners first. “Everyone’s working on BNPL now, so the simplest first step is to find out what your existing, trusted partners are doing that can work for your credit union.” References 1. Global Payments. 2022 Commerce and Payment Trends Report: 5 seismic trends shaping the future of commerce. 2. Ibid.
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