America's Credit Union Launches In-House BNPL Service
America's Credit Union (ACU) has introduced its own in-house Buy Now, Pay Later (BNPL) solution for its members. The move is designed to provide members with flexible funding options directly within the credit union's existing banking platform. This launch reflects a broader trend of traditional financial institutions adopting fintech-popularized products.
- The global "Buy Now, Pay Later" (BNPL) market is projected to reach a gross merchandise volume of $560.1 billion in 2025. This growth is a key driver for financial institutions to enter the space as a defensive measure against fintechs that are capturing transaction volume and younger customers, which could erode traditional credit card and loan businesses. - By developing its BNPL solution in-house, America's Credit Union retains full control over underwriting, member data, and revenue from interchange fees, unlike institutions that partner with third-party fintechs for a "white-label" product. This strategy avoids the complexities and potential brand dilution associated with external partnerships. - The strategic importance of the BNPL sector was highlighted by Block's (formerly Square) acquisition of Afterpay. Announced in August 2021 with a valuation of $29 billion, the all-stock deal's final value was closer to $13.9 billion when it closed in January 2022 due to a decline in Block's share price. - This move comes as the Consumer Financial Protection Bureau (CFPB) increases its oversight of the BNPL industry. Recent CFPB reports show that while the number of BNPL loans and users continues to grow, key credit performance metrics have improved; the share of loans charged off dropped from 2.63% in 2022 to 1.83% in 2023. - For credit unions, an in-house BNPL offering provides a competitive advantage by leveraging the institution's existing banking core. This allows them to use a comprehensive view of a member's financial health to determine their ability to repay, a data advantage fintechs typically lack. - While popular with consumers, BNPL fintechs like Affirm and Klarna have faced challenges in achieving consistent profitability due to high operating costs, rising funding expenses, and credit losses. Banks and credit unions can potentially overcome this by using their lower-cost deposit base to fund the loans. - The target demographic for BNPL services tends to be younger, with riskier credit profiles, leading to higher delinquency rates compared to traditional credit products. A 2023 CFPB report noted that BNPL users generally have more debt and lower credit scores than non-users.
