Credit Unions Adopt BNPL to Keep Gen Z Members From Switching

Younger members no longer represent a distant growth opportunity for credit unions — they're an active customer segment whose payment preferences are driving immediate product decisions.

New research from PYMNTS Intelligence and Velera reveals that installment payment value climbed 22% year over year, with transaction volumes also rising. The growth signals that usage is spreading across categories rather than remaining confined to a few verticals.

Consumers now apply installment plans to travel bookings, service purchases, and recurring bills, treating flexible payment timing as a core element of everyday financial management rather than a niche checkout feature.

Among Gen Z consumers, installment payments have evolved from an alternative credit product into an expected payment mechanism. The study found that 70% of Gen Z would use buy-now-pay-later if their primary financial institution offered it — a significantly higher adoption intent than older age groups.

This preference stems from both behavioural patterns and economic realities. Younger consumers gravitate toward tools that provide upfront clarity on repayment obligations and eliminate revolving balances. Fixed schedules and defined costs deliver the predictability and control this demographic prioritises.

Many Gen Z users first encounter installment options through merchant checkouts and digital wallets, where these tools receive prominent placement. That early exposure at the point of sale has normalised split payments, creating an expectation that similar flexibility should exist wherever they manage finances — including their primary banking relationship. When those capabilities are missing, younger members show willingness to look elsewhere.

For credit unions, allowing installment activity to migrate to third-party platforms means losing both transaction volume and insight into member financial behaviour. Over time, that erosion weakens engagement, particularly among younger members still establishing long-term banking habits.

Embedding installment functionality directly within digital banking platforms offers a solution to both challenges. When credit unions integrate these tools into existing account dashboards, members gain a unified view of spending and repayment obligations. This consolidation addresses a key friction point: the need to juggle multiple apps and payment schedules across disconnected services.

The strategic benefit extends beyond convenience. When installment payments flow through internal systems, credit unions maintain visibility into how members finance purchases, manage cash flow, and respond to different repayment structures. That data supports more personalised product development and more effective financial guidance.

Despite member interest — 38% of credit union members report they would likely use BNPL if their institution provided it — many credit unions have yet to launch these capabilities at scale. In the absence of in-house options, external providers continue capturing the demand, embedding themselves within merchant checkout flows and wallet applications.

Bridging that deployment gap requires more than product launches. Credit unions must ensure members know these options exist and understand how they fit within their broader financial picture. Effective adoption depends on member education, transparent communication, and seamless integration into familiar digital interfaces where members already conduct banking activities.