Buy now, pay later has become increasingly popular in recent years. As its use only continues to grow, credit unions will need to be ready to provide the option for this type of financing for members who need it. This is what FedFinancial Federal Credit Union has done with the help of its new partner, Equipifi. Sarah Snell Cooke, our publisher/co-founder, sat down to talk with FedFinancial COO JJ Johnson, FedFinancial Director of Lending Carlton Brooks and Equipifi Founder Bryce Deeney to discuss this new partnership and the importance of BNPL.

FedFinancial Federal Credit Union, which serves federal employees and their families in the Washington D.C. and Baltimore, MD metropolitan areas, noticed its members were using BNPL services. That meant the credit union needed to up its game to meet members where they were, and they were in BNPLs. The credit union partnered with Equipifi to offer safe, personalized, and easy-to-use BNPL features.

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Sarah Cooke 00:07
Hello, and welcome, everyone to this episode of The Credit Union Connection. I am here with three glorious gentlemen. We have from FedFinancial COO JJ Johnson. Welcome.

JJ Johnson 00:19 Thank you. Thank you.

Sarah Cooke 00:21
Director of Lending Carlton Brooks. Welcome.

Carlton Brooks

Thank you.

Sarah Cooke

And last but not least, the Equipifi CEO and Co-founder Bryce Deeney. Welcome.

Bryce Deeney 00:31 Hi, nice to see ya.

Sarah Cooke 00:32

Good to see you as well. So let's get started. Let's talk about guys. JJ, Carlton, can you talk a little bit about FedFinancial in your location and field-of-membership demographics, that kind of stuff that kind of give us some context for where you're coming from?

Okay, well, first of all, thank you for letting us come talk about an exciting product. FedFinancial, we're actually located in Silver Spring, Maryland, our Field of Membership, our federal employees who work in the Baltimore, DC, Maryland and Virginia area. And our mission has always been to help members meet their financial needs. And that's why we're partnering with Equipifi. So do their buy now pay later program, which we're going to call SpendFlex. So you just give us an opportunity to let people flex their budgets in a personalized, meaningful way. And like you said, it's federal employees, we're just trying to reach a younger generation as they start to come into the workforce.

All righty, Carlton anything to add there.

Carlton Brooks 01:29

I think he hit it. We're totally excited about partnership with Equipifi, and many will offer SpendFlex to our members, we are the first Credit Union Bank in the DMV area bringing this type of product to their members. So we're just totally excited about it. Yeah, that's great.

Sarah Cooke 01:47

And so I'm going to ask, this is for us throw this out to everybody. But Bryce, let's start with you. How do you see the current economy inflation, you know, wage stagnation affecting consumer spending and borrowing behavior? And is that is that generational? As Carlton kind of mentioned a bit ago?

Bryce Deeney 02:09

Yeah. And in the high inflation era, that we're all living through right now. I can only speak personally. You know, I, my, my water heater broke week ago, I had a plumber come out. And I got sticker shock when he told me and he said, Well, they were the last batch was stuck on a barge in the Pacific. So now the price is twice as high. So you know, this is impacting not just low income, but but really everybody, all the working working class throughout the United States. So, you know, with inflation to high, we still need to run our day to day lives. And the nice thing is credit unions are here to offer credits, it's literally in their name to two members that need it. And the most important thing is where do Where do consumers get the credit from? Is it priced fairly? is a price to adequately and is it delivered in a channel where I want it as a consumer?

Sarah Cooke 03:11

Yeah, definitely that consumer demand driven experience coming to the forefront about you guys from FedFinancial. Are you seeing, like similar behavior in your specific areas of service? As far as like super spending and borrowing?

JJ Johnson 03:33

Yeah, we're starting to see that more members want that financial flexibility. Because right now, before we brought on spin, flex, they would use use our debit card, but they'd have to go to the pay panels, and the affirms to get that split plate split pay payments. So now, we've SpendFlex money, we're now able to offer that to them all in one place. And I think that's something that people want it. They want these quicker answers. They want to be able to go to our online banking app and say, Hey, can I borrow against this for the things like Bryce said, the water heater? Can I borrow for those things? We've given them that opportunity. And that allows us to like we always say wouldn't meet members where they are. And I think that's something we get to do in this environment now.

Carlton Brooks 04:09

Yeah, and as director of lending, ICI loan applications come in, and we could tell over the last week, the economy the way it is, over the last year or two, that we are seeing a decrease in our personal loan application. So when we did some of our research to say, you know, looking at our members and where they are, a lot of them have already embraced by now pay later. solutions like JJ mentioned the corner your Affirms, your PayPal, and trying to meet our members where they are, knowing that we are a trusted financial institution for them. We thought it's been flex would be a great way for them to flex their payments, flex their budgets, and we wanted to again meet them where they were.

Sarah Cooke 04:49

Yeah, no, absolutely. The BNPL has really grown exponentially in popularity. I mean, the market As I was looking at some statistics, the market is currently at $132 billion, with 360 million people using Buy now pay later platforms. And that's projected to go up to 900 million people in 2027. So what kind of trend are you seeing in FedFinancial's service area? Do you have measurements on what member demand has been like or what you've already launched? So what's the usage been so far?

Carlton Brooks 05:26

So for us, it would actually launch live to our membership next week. So okay, what we're doing now is, we're wrapping up our testing, working alongside Equipifi. But what we've done is we researched our members and their transactions in the past. And we saw that they were already embracing Buy now pay later, we don't have a percentage of what that looked like what it was significant enough that we thought we needed to try to meet our members, as JJ mentioned earlier. And so we thought it's been flagged meeting Equipifi kind of all just lined up together, to where we can and again, be one of the first financial institutions to bring this solution to our members. And they already know us. So we're not a third party organization or FinTech offering this type of solution. They know us we know them. There's a trust there. And we were really happy about bringing it to our members.

Sarah Cooke 06:19
Yeah, yeah. And so Bryce, it sounds like a great time to be in the Buy Now pay later business.

What brought you to found Equipifi and why credit unions? Yeah,

Bryce Deeney 06:30

well, those are actually the same answer to both of those questions. Prior to starting Equipifi, I was an executive at formerly known as Alaska, USA Federal Credit Union, now they're Global Credit Union, top 20 credit union in the country. And I was head of payments. So my job day in and day out was how do I serve our members and meet them where they are? And how do I ensure that our product roadmap keeps us as a credit union competitive for top of wallet share, and market share within the communities that we service. And in 2019, and 2020, I started to see companies like PayPal and Klarna and Affirm, we're used more and more from the members that called us home. Fast forward to 2021. When we started Equipifi, those numbers continued to double your year in year out, you know, and then the pandemic only made that happen much, much faster. So I knew that my credit union could use a product like this to stay top of wallet and engaged with our members. And after calling a few friends, other credit unions, they all said yeah, if that product existed, we would buy it and launch it too. So I guess like most founders stories, I saw the problem, I felt the pain, and teamed up with a couple amazing co founders and launched Equipifi, and that was a few years ago. Fast forward to today, we are now servicing over 35 credit unions across the country. We're a CUSO. So we're backed by credit unions financially. And why credit unions because I believe in I believe in the mission and purpose and values that credit unions service their communities. Yeah.

Sarah Cooke 08:20

And it's so important credit unions, you know, partner with fintechs. And it's so much better when it's also a CUSO. I think keeping it in the family. So, you know, as you guys have all mentioned, some of the younger generations are the ones are kind of gravitating toward this is like 42% of those adults under 24 50% 25 to 34 50% of those 35 to 44. Apparently, I'm no longer while the younger ones, your generations, but it drops off after that has also been what you've seen at Equipifi guys?

Bryce Deeney 08:57

I think one of the fascinating things, you know, we are the only platform enabling this on existing debit card issuers. Right? So all the stats that you read today, that's how third party FinTech sees by now pay later rollout. So if I'm shopping at an e-commerce website, do I use my bank card issued by my primary FI? Or do I use third party BNPL? And yes, that button at the merchant checkout is very attractive to the 19 to 44 year old as you call it out, but when is provided from your trusted institution, what we've seen is it goes across all demographics, not only generationally, but income bands as well. The the largest power user we see is an older millennial making over $100,000 a year. That is not what the third party see because those consumers prefer to bank with their trusted credit union or you know, financial institution. They're not clicking the PayPal button which were unlocking that market for them.

Sarah Cooke 10:02

That's awesome. That's awesome. And so, JJ Carlton at the same time, I was shocked to learn the average age of a credit union member is 53. 53! And that's up from 47, I think about 10 years ago or so. So while this is reaching all the, all the demographics, are you also hopeful it will add to that younger member as well at that financial?

JJ Johnson 10:30

Yeah, that's that's one of the main reasons we wanted to use the Buy Now pay later program, because to today's kids, they don't want to go to wait fill on application, wait for the approval wait for the funding they want. They want answers now. And I think they get that with SpendFlex. And I think the fact that working with Equipifi and the way it integrates with our online banking and a mobile app, they get that quick information, that quick answer that they want. And we think that's definitely going to entice them to come join the credit union. And that's one of the reason why we think it's very important that you SpinFlex to, to reach that audience. But at the same time, we do realize that our turn older members, once they get the hang of this and use that I think they're going to be just as interested in the product. And I think that's definitely what we're gonna see. Yes,

Sarah Cooke 11:12

the old layaway that we were applied to it once that I'm just kidding. Baby. So, guys, when you were looking for a buy now pay later solution, what sort of due diligence did you perform? And what would you recommend for other credit unions looking at this type of solution? Because you said trust is so important. So you got to really look know who you're working with. Carlton?

Carlton Brooks 11:48

I agree, 100%. And I think once we met, equipped to find when we did that kind of initial introduction and our own research, we realized that they were the perfect match for us. I'll use the word turnkey solutions. They were they got us down to a science. So where we wanted to go, they knew the map and they were able to ride with us drive with us to get us where we are. They've been very helpful, not just on we partnered, as here's a product, do what you will with it, but they've helped us with the setup, establishing parameters, even in the marketing, how you roll it out to your members, what makes sense, it really has been a very seamless process. That process works very well with our core systems. So it was easy to link that up. And they've really got this down to a science. So it's been very, very smooth process with Equipifi.

Sarah Cooke 12:45
Awesome. You don't often hear that new implementation.

JJ Johnson 12:51

To add to that, yeah, qualify, they pretty much was they just held a hands got us through this. And as you know, we're used to implementations taken a long time problems. We had few problems with these guys. They just got it up and rolling. And so that's definitely kudos to equip fine what they offer to, to the credit unions.

Sarah Cooke 13:11
Absolutely. So, so Bryce, what are some of the common questions that you get from credit and executives when they're looking at your product? And what do you wish they would ask?

Bryce Deeney 13:25

Ah, I love that you gave me that second question. Some of the common questions we get, at least in the very beginning is, you know, why should we do? Buy now pay later, right. The last several years has been kind of like this coming wave. But a couple of years ago, if you were to ask 1000 credit union executives, are you planning on launching by now pay later? There was maybe like me and a handful of other executives that would have said yes, where last year, I believe Jack Henry did a study where it was 13%. And then it was 18%. So So 18% is still a large amount, right? That's almost 1000 credit unions that are planning on launching BNPL. But that's still 4000 that aren't so so there's still a lot of educational components that we have to walk credit unions through that this is not only something that you can provide your members that's better than what they get out in from third parties. But it also helps you stay competitive for that next generation of consumers who are looking for a place to park their money, write their deposits and borrow from so. Questions I wish a credit union would ask pause. All Give me Give me one second. This is like even like I'm like getting the bat let me Okay, all right. It 123 a question. I'm sorry, sir. What are you going to say first? Tell me what you want me to say.

15:12

I was talking about ghosts. Well, no, I just say was ghosts. But we just there's been so much rapid movement of major players in the MPL. I think that like, I think just, why is it important right now, so that you can actually really understand the urgency of why I think that that would be what I would like to plant.

Bryce Deeney 15:53

As far as what I wish credit unions would ask, if you read about Buy now pay later, just in the last week, Chase Bank launched debit card, buy now pay later on their checking accounts on their debit cards. A firm just partner with Google. So have you for the 100 and 30 million people that use an Android in the US, they now have a bacon Buy now pay later solution that's not from their credit union. So credit unions are being attacked as far as top of wallet from all sides. So it's not should we do buy now pay later? It's why are we not doing it today? I think that's the thing and the urgency that I feel as a former credit union executive. And that's why we are partnering with folks like fed financial to launch spin flex, because this is not only a way to remain competitive, but the urgency is super important.

Sarah Cooke 16:55

And I know you guys are calling it SpendFlex. So is this like a white white label product completely? Alright, are you asking me want to try that again? So I know fed financial is is calling this product SpendFlex? Is this a white label brace, white label product?

Bryce Deeney 17:24

It is yeah, we we don't want to be the brand for the consumer. You know, we really want to elevate our partners brands and make sure that they stay the center of influence around you know, managing money for their members. So everything we do, even the marketing kit that we deliver for our partner credit units is 100% White Label.

Sarah Cooke 17:43
Yeah, that's excellent. I think that's very important. As you guys were mentioning to very useful.

Carlton Brooks 17:50

It's a very robust marketing simple. When I tell you, we tell them what we were looking for, and we was like opening a gift. It was all there ready. So when you say white label is really, you know, come up with a nice name, and we find SpendFlex was a great fit for what we're trying to do, allowing our members to flex those past debit card purchases to match their budget in the next day or week as they needed to.

Sarah Cooke 18:19
And so, Carlton, JJ, what sort of expectations what goals do you have for the the Buy Now pay later, once it is launched?

Carlton Brooks 18:30

Well, our goal is to create a value added product for our members. What we want to do is have a win win situation a win for our members, that is a value added alternative to other Buy now pay later solutions out there a way to flex their purchases. So we feel like that's a win for them and for us at the credit union, as we discussed earlier, to retain our members across the board, but also retain attract new members. And if those new members are a younger generation, then I'll be you know, well for us.

JJ Johnson 19:04

And I think that's our main interests, we definitely want to attract new members to this. We're hoping that through this process, more members say hey, let me use my debit card in case I need to use his spin flex down the road. That's that's a once again, there's that flexibility they need. And I think that's going to help us grow in terms of not only just interest income, but also debit card interchange and make people once again become a primary financial institution. Mm hmm.

Sarah Cooke 19:28

Yeah, that's so hard to do these days. As the parents of an 18 year old, 21 year old and I have a 21 year old daughter in law. I hear them complain all the time about that kind of stuff. So we talked a bit about strategic benefits for the financial institution. So what are some of the financial benefits to the credit union? I mean, you guys talked a little about interchange and things like that, that it could, it could benefit so what are you all looking for in those areas?

JJ Johnson 20:00

We're just looking for increased activity. So like I said earlier continues to debit card for us. You know, that gives us an opportunity to reach out to the members, it gives more marketing, when they use a debit cards and to the mobile app, because it's so integrated directly into the mobile app, you know, now they get SpendFlex, they can also get other offers from us and gives us that opportunity to reach that audience. And I think it's definitely going to want people to utilize our services more. Now, obviously, that's what all creditors want us, we just want people to say, Hey, let me use my card. If I use it here, I can use that, you know, I get everything I need at FedFinancial. And that's what really want to hear people to say I get everything I need at my credit union. I can do that. I don't need paper, I don't need a firm, I just need FedFinancial.

Sarah Cooke 20:43

Perfect. That's the goal of every credit union. And Carlton, I'll pick on you now what are the less obvious benefits to the member other than like, obviously, you get to split up payments? Are there other benefits? Well,

Carlton Brooks 20:59

we are in house, we are an organization that we are their credit union that they know us again, they trust us. This is not a credit pool for them. This is based on their account relationship with us the offers that they receive. There's nothing new, they have to connect, there's no income, us the offers that they receive. There's nothing new, they have to connect, there's no income, there's no download, there's no new connection, no new cards, everything is as it was before, we're just giving you offers on purchases you would have made anyway, we're asking that hopefully you'll use your debit card to make those purchases and be able to split those payments up into three, six or nine months if necessary.

Sarah Cooke 21:39

Yeah, very streamlined. Sounds like for sure. So with that, gentleman. We're gonna go Brady Bunch style for everybody. The final thoughts? A start? Top left is Carlton. What are your thoughts on this?

Carlton Brooks 21:56

I guess my final thoughts are I think this is also when we look at it as and we talked about retention. But you mentioned the 19-20 year olds. I have a 21 year old, and they will not sit down to maybe do a paper application, they may ask you to do the paper application for him. And I'm really big in teaching financial literacy, I do believe this is a product that will help them budget better, it keeps them from having to take out maybe a credit card with a high interest rate that goes on their credit report and maybe hurt their credit. So when they're trying to buy a home, they can't do it. I think this is a great way to actually teach financial literacy and have people take more control over their account. Because the better the better you keep your account, the more offers you're gonna see. So account maintenance is always important and keeping that in good standing and not have an NSF or those type of overdraft things happening. And I think when you look at young people, they really need a product like this tied to their their financial institution. So again, I'm really excited that we're one of the first if not the first in the DMV area to bring this to our members. Yep.

Sarah Cooke 23:01
Excellent innovation. About you, JJ, final thought Yeah,

JJ Johnson 23:05

final thoughts were just really excited about this program. Just like Like Brian said earlier with, you know, the Googles and the chase, having it's great to know that a credit union, as small as us can compete with them in that market. I think that's one of the beautiful things that he qualified brings for us now SpendFlex, one of the first in the area. And you know, we get to be a part of that. And I think the best thing you want to see is I definitely see members thanking us for the product, thanking us for this quick access this quick information. And that's what we're really excited about. It's just we now are innovative, serving our members just as they would go to the to the bigger institutions. And I think that's one of the great things we're happy about. Yeah,

Sarah Cooke 23:41

technology can certainly be wiser. Oh, yes, for sure. So Bryce, last but not least, again, final thoughts for you as we close it up.

Bryce Deeney 23:50

I just get so much joy, you know, turning credit unions into fintechs. It brings a tear to my happy tear to my eye. You know, credit unions for decades, if not centuries. Now, some credit unions have been there for moments that are big moments and that consumers journey, right buying a car, buying a house getting a credit card for the first time. But I think one of the unique value ads that we're providing credit unions like fed fed financial, is we're bridging the gap between shopping and banking. So the high engagement of a product like this, to her now, members are logging into digital banking consistently and frequently. Fintech is not just a product, it's actually the outcome and how a consumer uses you as a financial institution. So seeing that now a 30 year old or a 20 year old is logging into their fed financial app twice a day. It's something that has never been done before. So I'm just I'm so thrilled to partner with with these guys. They've been a great partner Ah you know, a shout out to fit financial. If you live in those areas, please open an account that they've been great and I really appreciate your time for this interview as well. It's always great to lift up partners like fed financial of how innovative they are, and forward thinking as well.

Sarah Cooke 25:16

Awesome. Well, thank you gentlemen. Have a great rest of your day. Thank you.