By John San Filippo
On July 30, 2024, Scottsdale, Ariz.-based equipifi announced the addition of a pre-purchase option to its buy now, pay later (BNPL) platform, which it provides to credit unions and community banks. The new feature is called “Plan Your Purchase.”
The company’s original offering enables post-purchase BNPL, meaning that the member must make their purchase in full using their credit union’s debit card, then convert the purchase to a BNPL plan. The pre-purchase option eliminates the need for the member to initially fund the purchase with their own money.
Prior to the announcement, Finopotamus had the opportunity to speak with equipifi Co-Founder and CEO Bryce Deeney to learn more about this significant upgrade.
Deeney told Finopotamus that eligibility is pre-determined by parameters set by the credit union, as well as the financial context of individual accountholders. This means that Plan Your Purchase is fully automated, requiring no credit check, application, or manual intervention from the credit union.
“Most institutions will do something like a minimum threshold of $80 or a hundred dollars and a maximum of, for example, $2,500,” said Deeney. “The transaction has to fall within that range, but it also has to be at an approved merchant or an improved merchant category. Purchases like an ATM withdrawal or a cash advance or anything that is similar to money or a loan payment won't qualify for buy now, pay later.”
The UX
Finopotamus then asked Deeney to describe the user experience, using the example of a member at Dick’s Sporting Goods who decides to buy a $600 kayak using Plan Your Purchase.
“Everything is done within digital banking,” explained Deeney, “so the member would log into digital banking and indicate how much they need. They want enough for taxes, so maybe they request $650. They’re presented with the terms and options that they have been pre-qualified for by the credit union. They accept those terms and the money for that purchase is waiting in their account by the time they get to the cashier.”
Deeney added that if the member changes their mind or later returns the item, they can either cancel the plan with no prepayment penalty or hold onto to the funds for some other purchase.
The Trend Toward Streamlined Borrowing
A loan from a credit union has traditionally required a loan application from the member. According to Deeney, there’s a growing trend moving away from an extended application/approval process in many situations, BNPL being one of them.
“For products that have very long payback periods, like a mortgage or an auto loan, or you're extending credit indefinitely like a credit card, you need to look at a lot of history to make a determination on a lot of future,” said Deeney. “But if you're offering something that is short term, that is closed loop, that is finite, you don't need seven years of financial records to determine if Bryce can afford $650 for a kayak.”
He continued, “You need to make sure, does Bryce have a job? Does Bryce have some cashflow available so he can actually make this monthly payment? Has Bryce treated us well as a lender in the past? If I tick all those boxes, you should give me 650 bucks. Because I'm coming to you as a lender, you should say yes because if you tell me no, I'm going to somebody else who will give me that 650 bucks. And if you force me to fill out an application the old-school way, I'm already not wanting to borrow from you for that kayak because I know other people will offer me a better experience.”
A Better Fit for More Members
Deeney admitted that there are some functional similarities between Plan Your Purchase and the payday loan alternatives that many credit unions offer, but was quick to point out that each product is intended for a different audience.
“Payday alternative loan is a very specific legal term, where you are bringing in additional risk as the lender,” noted Deeney. “So, you typically charge a higher rate for that. Plan Your Purchase is still using the same decision engine as our original platform, which has charge-off rates to the tune of 10x lower than payday alternative loans. Plan Your Purchase is not priced to the member as if it has a very high charge-off rate because it doesn't.”
He added, “If you think about a hundred-thousand-member credit union, Plan Your Purchase is priced in a way that 95% of members will want to use it when they need to use it. A payday alternative loan is really built for those that are in that five to 15%, depending on the credit union’s makeup, of membership who are really strapped for cash.”