BOSTON — Installment payments are becoming a mainstream payment method for younger consumers, creating both an opportunity and a competitive challenge for credit unions as third-party providers gain share of member activity, according to new research from PYMNTS Intelligenceconducted with Velera.
In its latest report, “Pay Later’s Next Chapter: Why Credit Unions Are Rethinking Installment Payments,” PYMNTS Intelligence found installment payment value increased 22% year over year, while transaction volume also rose, suggesting usage is expanding across more purchase categories rather than becoming concentrated in a few sectors.
According to the report, consumers are increasingly using installment plans for travel, services and recurring expenses, signaling that flexible payment timing is becoming part of routine financial management.
PYMNTS Intelligence said younger generations, especially Generation Z, are driving the shift.
What Was Learned
According to the report:
- 70% of Gen Z consumers said they would use buy now, pay later (BNPL) options if offered by their primary financial institution, a higher level of interest than older generations.
- Younger consumers increasingly view installment payments as a standard payment method rather than an alternative form of credit.
- Fixed repayment schedules and defined costs appeal to younger users seeking predictability and avoiding revolving balances.
- Many Gen Z consumers first encounter installment options at the point of sale through merchants and digital wallets.
Extended Expectations
PYMNTS Intelligence said installment payment expectations are extending beyond retail and into primary banking relationships, with younger consumers increasingly expecting flexible payment options to be available wherever they manage money.
The report warned that for credit unions, allowing installment activity to move outside their ecosystems risks losing both transaction volume and visibility into member behavior, potentially weakening long-term engagement with younger members.
According to PYMNTS Intelligence, integrating installment options directly into digital banking platforms could help credit unions strengthen retention by allowing members to manage spending and repayment in a single interface while reducing reliance on multiple apps.
Additional Finding of Note
The report also said internal installment offerings provide institutions with greater insight into how members finance purchases, manage cash flow and respond to repayment structures, potentially supporting more personalized product development and financial guidance.
PYMNTS Intelligence found that while 38% of credit union members said they would likely use BNPL if offered by their institution, many credit unions have not yet implemented installment capabilities at scale.
The report concluded that successful adoption would require more than product availability and will depend on member education, clear communication and integration into familiar digital banking experiences.
