[September] Fintech Debit Cards, Travel BNPL, and Holiday Prep

Welcome to the September edition of BNPL Insights & Innovation, your one-stop source for Buy Now, Pay Later news, curated for banks and credit unions. This month, we’re reviewing the maturation of BNPL for both fintech and financial institutions, the implications of the Affirm Card, and a demographic breakdown of consumer use cases.

-- Jazzy Z. , editor in chief

The Industry at a Glance

BNPL continues to mature as an industry with promising trends. Insider Intelligence reports that for BNPL to grow substantively, “BNPL fintechs will need to develop their digital wallet ecosystems, launch cross-generational marketing campaigns, and tout their higher-income users to retailer partners”.

This is exactly what many providers have begun to offer, with BNPL fintechs launching plastic cards and expanding to more retailers. Affirm’s recent Quarterly Results showed that even with 70% of interest-bearing installment plans at up to 36% APR in July, the volume of BNPL usage continues to grow. Meanwhile, Affirm’s BNPL delinquency rates are performing better than major credit card issuers today.

Financial institutions have continued to roll out their own BNPL programs to members. Jack Henry ’s survey found that 13% of credit unions were adding BNPL over the next 24 months. equipifi data shows that when they do, credit unions' BNPL have outperform 3rd party providers within the first 30 days.

Here Comes Fintech BNPL Cards

BNPL branded cards are here, and consumers love them. On the debit front, Affirm has been rolling out its branded debit card, the Affirm Card, to its BNPL users since May. Now, Affirm users can access split payments on the debit card before and after making purchases by accessing their Affirm apps. Affirm's Quarterly Report shows an average of 75K new accounts created every month.

Financial institutions with their own debit BNPL remain competitive with lower interest rates and existing relationships with their cardholders. As predicted by PYMNTS research, consumers continue to prefer credit from their primary financial institution when available. Meanwhile, the staggering growth of the Affirm Card poses a threat to debit card products without similar capabilities.

On the credit front, Amazon Pay has teamed up with Chase to offer BNPL to Prime Visa and Amazon Visa cardholders.

The Travel Sector is the Current Frontier for BNPL

From Affirm signing with Bookings.com, Klarna partnering with APEXX, and Upgrade (a banking startup) acquiring Uplift (a travel BNPL fintech), one thing has become clear: the travel sector is ideal for customer acquisition if you are financing purchases. Here are the reasons:

• Tapping into consumer spending preferences
• Access to Millennial and Gen Z users

Similar stats can be found in usage data from financial institution’s BNPL. From tickets to lodging, cruises to resorts, travel expenses can make up 18% of a financial institutions’ BNPL use (source: equipifi). In comparison, Affirm saw 17% of BNPL use toward travel and ticketing (concerts/events). ?

Cross Generational Insights For BNPL

Across generations, many will feel the impact of student loans returning at the end of month. Millennials with student loan debt expect to see spending power reduced by 6.5%. Meanwhile, Gen X will likely be the hardest hit with payments resuming. Given Gen X likes BNPL as much as Millennials, flexible spending options will be most attractive to these two demographics.

Meanwhile, Gen Z remain the most enthusiastic users of BNPL, and are more willing to use BNPL for small, everyday purchases. In fact, one in four Gen Z shoppers won’t make a purchase if BNPL is not offered. In comparison, Millennials and Gen X will use BNPL for larger purchases such as furniture, travel, and medical expenses (source: equipifi).

It’s only September, but major industry players are getting holiday campaigns ready. For banks and credit unions that are offering BNPL, it’s time to stay competitive during these consumer shopping events. We are rolling out a holiday campaign guide in October to help your marketing teams stay up to date with insights, strategies, and even a sample campaign calendar for holiday 2023.

If you are a financial institution, sign up here!