Every payment tells a story about a member’s financial life. The challenge for credit unions is that more of those stories are now being told somewhere else.
Buy now, pay later (BNPL) has transformed from a checkout convenience into a growing part of how consumers manage cash flow, budget, and make purchasing decisions. While these installment options create flexibility for members, they also create new relationship opportunities for the financial providers that offer them—opportunities many credit unions have yet to capture.
In a recent PaymentsJournal podcast, Adam Hodz, Managing Vice President of Payment and Channel Solutions at Velera, and Ben Danner, Senior Debit Analyst at Javelin Strategy and Research, discussed the evolution of BNPL usage and how credit unions can differentiate themselves by integrating BNPL capabilities into their offerings.
At its core, BNPL is about giving consumers more choice. That makes it more critical for credit unions to deliver a comprehensive suite of solutions that keeps them at the center of members’ financial lives.
From Financing to Money Management
In its early stages, many viewed BNPL as a modern form of layaway, allowing consumers to split larger purchases into manageable installments. While that use case still applies, today’s BNPL landscape has evolved beyond that original concept.
“It’s an evolution from a financing option for large purchases into everyday money management,” Hodz said. “The buy now, pay later conversation is shifting from, ‘Can consumers finance and purchase?’ to consumers expecting flexibility in all transactional situations. Whether it’s online or in-store, they want that flexibility.”
Mounting evidence shows that a significant portion of BNPL transactions are used for everyday purchases under $30, and some consumers rely on these products on a weekly basis.
As installment payments become a common tool for budgeting and cash flow management, credit unions that offer only traditional card products risk falling behind evolving member expectations.
“Smoothing out routine expenses, managing short-term cash flow, and helping to create a little more predictability in their budgets. If those options are available only through fintechs or merchant-driven providers, credit unions are going to risk being on the outside looking in,” Hodz said. “It’s incredibly important to offer those flexible payment channels that consumers and members are looking for to help manage their money.”
Payments Are Relationship Moments
One of the key reasons BNPL has become essential is that it allows credit unions to maintain a more complete view of member behavior.
Today, many BNPL experiences occur outside the credit union ecosystem through fintechs and merchants. This not only limits visibility into member activity but also creates risk that members will build stronger relationships with external financial services providers.
As more transactions move beyond a credit union’s reach, institutions lose opportunities to engage members through loyalty programs, personalized offers, and targeted promotions. These touchpoints are essential ways for credit unions to strengthen relationships and position their digital banking experience as the preferred destination for financial activities.
The risk for credit unions is not simply losing a handful of transactions to BNPL providers—it is losing relevance during moments when members are making critical payment and financing decisions.
When credit unions are absent from those moments, they also miss opportunities to capture valuable behavioral and financial insights, including emerging payment preferences and retail trends.
These factors are especially important as competition across financial services continues to intensify. While fintechs may have initially focused on niche use cases, many now offer deposit accounts, debit cards, and other products that directly compete with traditional banking services.
“This is especially important because payment moments are relationship moments,” Hodz said. “Every time a member chooses how to pay, finance, or manage a purchase, they are also choosing which provider they trust to help navigate that need.”
“When a fintech or merchant-owned buy now, pay later provider owns that interaction, it gains visibility into member behavior, captures engagement, and builds habits that can gradually shift the financial relationship away from the credit union,” he said.
Within the Sphere of Trust
Despite this competitive market, credit unions have a unique opportunity to differentiate themselves from other financial services providers: the trust they have already established with members.
A recent study by Velera found that nearly half of credit union members already use BNPL via providers outside their financial institution, while 38% said they would be likely to use a BNPL solution offered by their credit union.
This gap represents a substantial opportunity.
“Unlike fintechs or merchant providers, credit unions are not starting from a purely transactional relationship,” Hodz said. “They already have that relationship, and the credit union philosophy is driven by trust and service and financial well-being—and that the credit union is going to help build a relationship for where you’re at and meet their members where they need. That creates an advantage.”
The most effective way for credit unions to capitalize on this opportunity is by embedding installment options directly into the digital and payment experiences members already trust and use every day. Doing so positions BNPL not as an external financing product, but as a natural extension of the credit union relationship.
A digital-first approach gives credit unions greater control over how installment options are presented and enables them to surface relevant offers within online and mobile banking experiences. Institutions can also define qualification standards, available terms, and repayment structures that align with the broader member experience.
These capabilities are particularly valuable as consumers face increasing financial pressures, including elevated interest rates, rising credit card debt, scams, and predatory lending practices. In this environment, consumers value transparency, guidance, and trusted financial partners.
Additionally, as more borrowers use multiple BNPL loans, it can become difficult for consumers to track payment schedules, outstanding balances, and remaining installments.
By bringing BNPL into the digital banking experience, credit unions can provide members with guidance and transparency.
“It’s a way to be there at the point-of-sale with an option that your customers are looking for, but it’s also this unified banking experience with your own branding,” Danner said. “Financial institutions have built up these relationships over many years and they’ve developed a strong sense of trust with their customers, particularly credit unions.”
“It’s a way to offer something new and innovative within that sphere of trust to your cardholders, meeting customers with an option of something they prefer to use,” he said.
Present at the Point of Decision
One approach gaining traction is debit-based BNPL. Debit cards have become a cornerstone of everyday financial activity, and extending these programs with BNPL capabilities can help credit unions expand their role in members’ purchasing decisions.
“It provides access to lending solutions for your customers that also might not qualify for credit products and opens the door for them, or perhaps for those customers that don’t want to sign up for yet another credit card,” Danner said. “That gives them a point of view to financing options.”
“Buy now, pay later is also something that’s attractive to the next generation of cardholders—your younger generations and your Gen Z—and pretty much all of the data shows that,” he said. “These tend to also be very debit-heavy populations. They’re going to be using their debit card and now have access to this buy now, pay later solution.”
Solutions like Velera’s BNPL suite enable credit unions to offer debit flex payments, allowing them to personalize installment options in real time.
On the credit side, Velera offers flex payment capabilities through Apple Pay’s pay with installments feature, bringing financing options directly into the checkout experience at more than 90% of U.S. retailers. Members can view and select installment options during an Apple Pay transaction before completing their purchase, creating a seamless point-of-sale experience.
This allows credit unions to move beyond traditional post-purchase installment options. Through the digital banking experience, credit unions can establish loan qualification standards, repayment terms, and underwriting parameters.
Ultimately, Velera’s platform is designed to help credit unions compete more effectively by providing a modern payment experience that meets members where they are and supports their evolving financial needs.
“The significance of the expanded suite is that it gives credit unions a more complete way to participate in installment payments across both sides of the card relationship for the members who prefer to manage spending from their deposit count, as well as those using credit at checkout,” Hodz said.
“That changes the game because credit unions can move from reacting after purchase to being present at the point of decision,” he said.