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Written by Cyndie Martini
on March 02, 2021

Consumer financial behavior saw many changes during 2020. Consumers reined in spending and increased savings. Their credit card balances declined. Overall, consumers focused on paying down debt and increasing savings.

A new payment method that gained popularity during 2020 was buy now, pay later, or BNPL. BNPL lets customers purchase an item and pay for it in installments without incurring interest. The service is paid for by the merchant, who is charged a percentage-based transaction fee, which can be higher than the fees charged for credit card transactions. However, with some customer segments, such as Millennials and GenZ, choosing other payment options over credit cards, BNPL can make sense.

Some of the big players in the BNPL space are Affirm, splitit, and PayPal. Customers don't pay any fees or interest if they make on-time payments. Fees may be incurred if payments are missed. Customers view BNPL as different from credit cards. During the checkout process, the payment schedule is fully displayed along with any fees, making the BNPL option very transparent. 

A big advantage of BNPL for merchants is the acquisition of a non-credit card customer, generally larger ticket purchases, and repeat purchases. BNPL isn't replacing credit cards but it is certainly a viable payment method that merchants should consider offering.

PSCU has taken notice. It will begin offering cardholders an installment plan payment option. Smaller fixed payments will be made over a pre-determined timeframe, allowing cardholders to budget their purchase. PSCU pointed out that the average installment plan ticket size increased by 50%, according to Visa and Klarna Insights. The same research found that repeat purchases increased by 20%.

The PSCU BNPL solution will work a little differently than the current BNPL solutions. Instead of establishing new credit, PSCU cardholders will use their existing credit line. That means no credit checks or new issuance of credit are needed.

Fiserv will provide PSCU's BNPL technology, and installment payments will integrate with PSCU's Digital Xperience (DX) suite.

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