Last year, your cardholders could only get BNPL from Affirm, PayPal, or Klarna. Now, they can find competitive debit card products from US Bank, Chase, and even a growing number of credit unions that now provide bank BNPL.
3. Loss of liquidity and cashflow
I’ll keep this one short because it is directly related to the loss of cardholder relationships. When members are shopping, the BNPL provider that helps them split their payments is the one financing their purchase. Financial institutions lose out on interchange and interest income opportunities. Cyber Monday alone saw a 42.5 percent year over year increase in BNPL use.
Even if you are willing to accept the cost of losing engagement and debit card accounts, if liquidity is at all a concern to your institution, it would be beneficial to look inside and see how much of your debit cardholder base is utilizing BNPL.
4. Loss of long-term positioning at the top of wallet
BNPL is growing with no signs of slowing down. Financial entities with more resources and bigger budgets are starting to release their own products at breakneck speed. The major advantage that banks and credit unions had in 2023 (their existing relationship, cardholder loyalty, an absence of FI competition, and time) are all running out. What this amounts to down the line is the loss of position at the top of wallet, and loss of status as a primary financial institution.
We’ve seen BNPL vendors become payment companies and payment companies try to become pseudo financial institutions. 2024 will only see this competition escalate, and it is time for banks and credit unions to start making defensive play not only to remain competitive, but also thrive with everchanging consumer expectations.