It’s 2025 budget & strategic planning season for financial institutions, and Buy Now, Pay Later (BNPL) is proving to be a popular line item for the upcoming year. Our team speaks with leaders in all areas of banking leadership, but one department is a clear champion of BNPL discussions within their credit union: Lending.
In equipifi’s experience, CLOs and VPs of Consumer Lending are evolving into payments innovators by advocating for BNPL. That’s because BNPL brings compelling benefits to the credit union and its members. Here are some of the common benefits we’re hearing from lending leadership across our customers and prospects:
“Buy Now, Pay Later Mitigates Delinquency”
-Indira Khan, SVP of Mortgage and Consumer Lending at Suffolk Credit Union
Indira explains when members need a little more financial flexibility, having access to a short-term, small dollar credit product like BNPL makes their checking account less likely to go negative. Beyond paying for specific purchases, the speed and convenience of using BNPL allows Suffolk’s members to have access to funding – funding that they already qualify for – when liquidity is momentarily low.
And about the delinquency rates of the BNPL program itself? Indira has shared that across Suffolk’s 700+ BNPL loans, only two have charged off to date (that’s 0.2% for the lending math nerds out there). In fact, Suffolk is considering loosening some of their eligibility parameters to expand BNPL access to more members, since there is more flexibility for risk. This year, the aggregate 30+ day delinquency rate of credit unions on our platform is 1.43% (as compared to 3.25% with a standard credit card portfolio).
Members Prefer Applicationless Lending
Lenders LOVE automation and self-service capabilities. Outside of creating operational efficiency, lending automation stays true to the credit union mantra of “meeting members where they are.”
Mike Shoaf, Chief Lending Officer at SunWest Credit Union launched BNPL to help members ”actualize themselves, giving the members the agency so that they can get a loan when they want it, not when one of my lenders is available.”
That’s the benefit of applicationless lending: credit unions know the financial context of their members, allowing them to personalize their pre-approved BNPL program to generate high-quality loans that are meaningful to the member at that specific moment in time.
The entire member experience of accepting a BNPL loan offer requires less than 30 seconds, with funds deposited into their account in moments. These small-ticket loans are delivered to members at their time of need with no intervention from loan officers, and accepted with no need to wait or the fear of rejection. A truly frictionless banking experience.
Lending that Meets Individuals Where They Are
An overwhelming majority of BNPL usage is being captured by 3rd-party fintech BNPL providers like Affirm, Klarna, and Afterpay. Sara Plothow, Chief Lending Experience Officer at Westmark Credit Union, was looking for a solution to fill that gap. “Our consumers are already using a product like this,” she explained, “but we believe that members should be getting it from a trusted financial partner.”
Traditional lending products are meant for members in specific life events like buying a car, renovating a home or alleviating financial stress. CLO’s view BNPL as a product that can address a broader group of members: a small infusion of cash to support any situation. It’s not specific to a particular demographic or income level, and functions as a credit product for members who typically don’t use credit cards.
Designed for Financial Institution Implementation
Financial institutions face unique barriers to meet consumer needs, as they need to operate within highly specific regulatory guardrails. When it comes to launching BNPL, it’s best to invest in a partner solution designed to enhance the banking relationship while satisfying regulatory requirements.
Mike and Sara noted that their BNPL program had the “shortest and easiest implementation” where they could rely so much on partnership expertise that they “didn't have to make any decisions.” Afterwards, Indira added, the credit union wins “because we were able to offer our members a product that helps them meet that day to day challenge that they may face.”
Are you a lender who is BNPL-curious? Let’s chat! I’m happy to show you how this can look for your financial institution, or connect you to one of our customers to speak to their experience.
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