By Roy Urrico
Consumers began 2025 with strong purchasing levels despite a drop in confidence and higher-than-forecasted inflation. Concurrently, debit purchases posted the best monthly year-over-year growth since February 2022, while credit remained solid. These are some of the findings in the February 2025 edition of the Velera Payments Index. The report also featured a “Deep Dive” on the continued rise in popularity of buy now, pay later (BNPL) offerings.
St. Petersburg, Fla.-based Velera, which describes itself as the nation’s premier payments CUSO and an integrated financial technology solutions provider, designed the Velera Payments Index to help credit unions and other financial institutions make strategic, data-informed decisions on behalf of members and customers.
"The rise of buy now, pay later highlights the increasing demand for convenience and flexibility, especially among younger consumers,” said Cody Banks, senior vice president, product experience and enablement at Velera. “While BNPL offers ease, it also brings considerable risks to consumers, such as potential overspending and debt accumulation. BNPL also poses a significant threat to traditional credit cards, challenging credit unions to reinforce benefits like rewards and credit score building that BNPL lacks. Credit unions should take the lead in educating members on the variety of payment methods available, empowering them to make informed choices and enhance their financial well-being
Some Economic Indicators
The Index reported the Conference Board Consumer Confidence Index (CCI) declined by 5.4 points in January to 104.1. Meanwhile, the University of Michigan Index of Consumer Sentiment (MCSI) fell to 67.8 in January. This second straight month of declines represents a 5% month-over-month drop and a 12% year-over-year (YoY)reduction, with all five index components falling on increased fears of inflation returning in part due to the imposition of tariffs.
The five components of the CCI and MCSI are current business conditions, business conditions for the next six months, current employment conditions, employment conditions for the next six months, and total family income for the next six months.
In the Labor Department’s Feb. 12, 2025 update, the Consumer Price Index (CPI) increased 0.5% in January, bringing the cumulative 12-month rate of inflation up to 3.0%. Thirty percent of the January increase came from the shelter sector. The energy index rose 1.1% over the month, with gas up 1.8% and food up 0.4%. Core CPI, which excludes the food and energy sectors, increased by 0.4% in January. Increases were seen in motor vehicle insurance, recreation, used cars and trucks, medical care, communication and airline fares. Decreases were seen in apparel, personal care and household furnishings.
In January, jobs grew by 143,000, with increases in healthcare, retail trade and social assistance. While the January number is roughly 26,000 fewer than expected, the job count numbers were increased for November and December for a combined 100,000 jobs. The U.S. Bureau of Labor Statistics (BLS) reported the overall unemployment rate decreased slightly for January to 4.0%, or 6.8 million people.
Credit and Debit Takeaways
For the first month of 2025, YoY growth rates improved for debit and held steady for credit. Debit purchases were up 7.8% and credit purchases were up 2.5% in January. Debit transactions were up 4.8% and credit transactions were up 2.8%.
For debit, money services returned as the top contributor to growth in purchases, accounting for one-third of the YoY increase. The goods and services sectors had the second largest impact for debit and the largest YoY increase in credit purchases.
Growth in BNPL payments and transactions facilitated by cards increased 28% and 22%, respectively, for the top BNPL merchants for full-year 2024 compared to 2023.
Deep Dive on Buy Now, Pay Later
The Index followed up on its BNPL check-in from January 2024, finding continued strong growth among the largest BNPL providers. In aggregating the YoY growth in BNPL payments via card for Affirm, Afterpay, Klarna, PayPal, Sezzle, Zip/QuadPay and Uplift, debit-based payments were up 28% for 2024 (January through December) and payment transactions were up by 22%.
The average BNPL debit payment with these top providers was $40.13. “It is important to note each transaction represents only one of multiple installments (typically four) with the BNPL vendor, not the total purchase,” clarified Velera.
“Fifty-six percent of consumers have used a BNPL service within the last year and it has become a leading driver with merchants to increase sales and customer loyalty. Further, FICO has announced plans to add BNPL to credit score calculations, given its growing popularity and observed predictiveness for consumer credit risk,” according to PYMNTS Intelligence, said Velera.
The Velera Deep Dive also reported Zip/QuadPay, Sezzle and Affirm had the highest growth in BNPL payments cumulatively for 2024, up 68%, 41% and 40%, respectively. Affirm had the highest growth rate of BNPL payment transactions, up 54% overall for the year. However, the average BNPL payment dropped 9% over the same period, from $54.06 to $49.29.
What Should Credit Unions Do Now?
The Index made some recommendations for credit unions:
1. Credit unions should keep a pulse on member usage of alternative payments, including (BNPL). To offset the impacts of BNPL, credit unions should constantly communicate the value of their card offerings, including zero liability, rewards and convenience. Additionally, credit unions should optimize card integration into digital banking, leverage the usage of mobile wallets and consider the addition of post-purchase installment options on their credit card products.
2. Focus on checking accounts to drive debit growth. According to Velera’s Advisors Plus Payments & Deposits Consulting, credit unions that do not focus on this area in 2025 should expect volume growth to be nominally lower or even decline.
3. Credit unions should strengthen portfolios by offering competitive rewards products that drive member engagement and enhance loyalty. Positioning rewards programs as valuable financial tools will allow credit unions to deepen member relationships, increase transaction volumes and boost fee income.