In the rapidly expanding world of buy now, pay later (BNPL) services, credit unions are finding ways to compete and thrive using Credit Union Service Organizations (CUSOs). CUSOs are formed by credit unions to collaborate and pool their resources to offer efficient and cost-effective payment solutions for members.

By partnering with a CUSO, credit unions gain access to economies of scale, advanced payment technologies, risk management expertise, regulatory compliance support, and improved member services. It also allows them to compete with larger financial institutions by providing modern payment solutions to their members.

During a recent PaymentsJournal podcast, Cody Banks, managing vice president of Payments and Fraud Strategy at PSCU, and Brian Riley, Co-head of Payments at Javelin Strategy & Research, explored the unique BNPL options that credit unions can offer and how those can enhance members’ financial wellness.

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The Appeal of BNPL With Credit Union Flair

With the ubiquity of BNPL options at point-of-sale checkouts, as well as the capacity to budget for purchases retrospectively, consumers have embraced the payment model. The ease of use, checkout process, and straightforward terms—and the fact that many services offer zero-interest or low-interest rates—add to the appeal.

Although BNPL can serve as a helpful budgeting tool if used correctly, it also carries the risk that consumers could exceed their means if the method is not managed carefully. To mitigate this risk, credit unions must strike a balance between embracing BNPL as a budgeting tool and ensuring responsible lending practices.

“Packaging BNPL services in a way that promotes responsible use and aligns with the credit union’s vision is crucial,” Banks said.

By leveraging existing credit lines and working within consumers’ approved credit limits, credit unions can help members better budget their purchases. To make this possible for their members, credit unions have teamed up to offer these services with CUSOs, such as PSCU, to offer BNPL and other products.

“Something that PSCU has done nicely is integrating BNPL into a platform where the credit union can offer the similar product that’s been done by big banks for a couple years now,” Riley said.

Differences Between Credit Union BNPL and Other Players’ Offerings