Lending, disrupted: How credit unions can take the fight to BNPL lenders

And just like that, the holidays are upon us once more. Lights a’twinkle, bells jing-a-ling, and the Buy Now, Pay Later lenders wring their hands with glee. As consumer debt and delinquencies sit at record highs, do credit unions have an obligation to take the fight to them?

The rise of Buy Now, Pay Later (BNPL) loans over the last two years is nothing short of astonishing. Hyper-aggressive marketing and savvy fintech innovators brought true disruption to the lending experience, and while not yet a dominant force, a 40% increase in BNPL lending over 48 months is nothing to laugh at.

The beauty of BNPL is in its simplicity. A one-time purchase can be spread across monthly payments, often offered by embedded financiers customers have no existing relationship with. With a single click, an item is procured and the payment cycle begins … sadly, however, for consumers this has proven extremely difficult to track.

Now, millions of people (an increasing number of whom are eager to use BNPL more regularly) are unsure of how far and wide their debt spreads. Similarly, as credit bureau reporting for BNPL is sketchy at best, it leaves credit unions unsure of the true state of their members’ finances.

What’s clear is that BNPL isn’t a trend, it’s a cultural shift. Credit unions need to adapt their marketing strategies to acknowledge this and take the fight to the BNPL lenders.

Financial education is key

The first step to addressing any problem is understanding it. That means education is key. Sure, many BNPL providers promise no-interest solutions, but the reality is hidden fees and repayment traps are common.

Rather than shying away from even mentioning BNPL (although it is a four-letter word) credit unions can tackle the issue head-on, leveraging their digital reach to highlight the key risks.

Simple email journeys cross-selling more suitable options, in addition to financial counseling for those already in the debt trap, can quickly be stood up. Similarly, smart social media posts can infuse a little levity into the conversation during what is, after all, a season of joy, while still providing vital information.

What’s in that box marked ‘Credit Cards’?

Building on that fundamental education, many credit unions may also be sitting on the core—indeed, original—BNPL alternative: The credit card.

Often overlooked because the bigger banks’ marketing budgets have convinced credit unions to do exactly that, the credit card is literally a buy now, pay later solution.

Yes, it may seem almost predatory to promote credit cards during the festive season but what’s the alternative? If your members intend to spend but don’t have the necessary capital, promoting a safer alternative with capped interest rates, managed by an organization committed to the member’s financial health (not their fiscal value) can be a marketing play as effective as it is impactful.

Celebrating community connections

Another positive output of a refined marketing strategy is the opportunity for credit unions to flex their community credence.

The big banks and fintech bringing BNPL to the masses do so from arm’s length. Yes, PayPal is a household name, and Klarna’s tickling the edges of an IPO, but they will never be truly grounded in community … unlike credit unions.

This holiday season is an ideal time to flex that particular muscle, with 90% of Americans reporting that spending within their local community improves their quality of life.

Credit unions are uniquely positioned to own this space. Strengthening relationships with local merchants and developing incentives for consumers to spend local—with credit union cash—capitalizes on this moment in time while also opening up long-term potential SBA growth, and further cementing any credit union’s position as the local financial partner.

The digital innovation imperative

Ultimately, this holiday season is just one battle in a war that will realistically be won on-screen. Seamless digital services are table stakes, digital account opening is expected, and the ease and gravity of embedded finance opened the door for BNPL’s success in the first place. But nobody ever accused the credit union system of shying away from a fight.

If you’re looking to rethink your marketing strategy, recapture your member’s attention, and deliver on your mission, reach out— we’re here to help.