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New Buy Now, Pay Later Solution Helps Credit Unions Remain Competitive

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The COVID-19 pandemic has been the catalyst for a series of changes in consumer behavior, including the search for new ways to budget and improve finances. Online shopping is growing exponentially, and Buy Now, Pay Later (BNPL) is quickly becoming mainstream in the payments industry for its flexibility and ease of use.

Recognizing that demand for this convenient payment option will only grow, PSCU recently announced that it will soon be offering a new installment payment solution that will allow credit unions to offer more flexible payment options to eligible members.

To learn more about the rise of the new BNPL and PSCU solution, PaymentsJournal met with Jeremiah Lotz, Senior Vice President of Digital and Data at PSCU, and Brian Riley, Director of Credit Advisory Services at Mercator Advisory Group .

Payments Journal

New Buy Now, Pay Later Solution Helps Credit Unions Remain Competitive

Payments Journal New Buy Now, Pay Later Solution Helps Credit Unions Remain Competitive

The boom in buying now, pay later

While the general concept of buy it now, pay later has been around for decades in the form of retail finance, it is now being driven by fintech and tech companies in new ways.

“Buy Now, Pay Later The loan in its current form is designed to fit a household budget and provide transaction financing for a small or medium-priced item that is paid in four transactions over time. This is something that fintechs have aggressively latched onto, ”said Riley.

The graph below, provided by Mercator Advisory Group, reveals that buy now, pay later will exceed $ 100 billion in the United States by 2024, compared to just $ 2 billion in 2019.

It’s no surprise that COVID-19 has boosted BNPL’s popularity with consumers. “The timing was perfect for this, as these are low cost items that you will typically find on an online channel, and a lot of people who weren’t credit prepared with their credit scores or didn’t. lacked the financial means to qualify for bank grade loans were able to obtain loans, ”Riley added.

BNPL offers financial institutions (FIs) and fintechs an opportunity to meet consumers where they are technologically speaking and provide a level of convenience that matches today’s world. Think of it as a modernized layaway program. “The opportunity here is to tap your digital device, you can get the product you’re looking for, but you can also set long-term payment terms and options that match your experiences and expectations,” Lotz said.

Young adults are a key demographic target for BNPL

Overall, millennials and millennials are key demographic targets for BNPL. “They are digital natives who grew up in a world in which they have opportunities for instant gratification. So, in this case, you are instantly able to get that product or service that you are looking for. And they have the ability to make it work for them on their terms, ”Lotz explained.

Of course, this does not mean that other demographic groups do not wish to take advantage of the flexibility offered by BNPL solutions. Data from the Federal Reserve shows that the revolving debt of adults over 70 is growing faster than that of young adults. “But that’s exactly where you don’t want to grow up,” Riley warned. “When you tie up clients or members, you want to be able to come in and nurture them for life, and that long-standing relationship is important,” he added.

With installment loans, credit unions can make their mark

According to Lotz, financial institutions and credit unions need to recognize that BNPL is more than just a trend. “I think the long term relationship that you are able to build with this client… can [be built by] by giving them the opportunity to accumulate credit and ultimately rely on you as a financial institution for other needs, ”he said.

By taking advantage of this opportunity, FIs and credit unions can position themselves well for long-term income gains. “As long as credit unions continue to take advantage of this as one of their opportunities and educate clients on these other services they provide, I think it certainly creates long-term income generation for these institutions. financial, but also gives these consumers the opportunity to really understand how credit unions are there for them, ”he added.

Small credit unions can benefit from BNPL products that help them stay competitive in a landscape increasingly crowded with large FIs and tech-savvy fintechs. “This is a good opportunity for credit unions to realize that they have an advantage over some of these fintechs and that these fintechs are able to offer very specific functionality. As a credit union, if you put that in the spirit of your whole offering, link it to your rewards program, link it to the offers of other solutions, it really starts to solidify you as a than a primary financial institution, ”Lotz said.

Presentation of the PSCU installment payment solution

Recognizing the potential of the BNPL space, PSCU recently announced that it is moving forward with an installment payment capability. The installment payment solution is powered by technology from Fiserv.

“What it will do is leverage the consumer’s card account through the financial institution. They will make a purchase and then they can [use] PSCU’s digital mobile app, which we’re bringing to market through our relationship with credit unions, to go in and take that purchase they’ve made and turn it into an installment plan, ”Lotz explained.

The visual below, provided by PSCU, illustrates the seamless and straightforward transaction experience for consumers taking advantage of the installment payment solution:

Overall, it’s a win-win. It gives credit union members the freedom to budget according to their needs and have better control over their finances. From a financial institution or credit union perspective, it offers the possibility of having a different type of spending and transactional relationship with consumers than they could in the past.

The improvement of the solution is that it gives consumers the seamless and convenient customer experience they need. “The experience is pretty straightforward from the consumer’s point of view. You make a transaction, you choose what works best for you, you agree to these terms and you are on the right track, ”Lotz concluded.


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