More than a century ago, the invention of the cash register revolutionized commerce. Before its arrival, shopkeepers relied on handwritten ledgers and mental math, leaving room for human error and vulnerability to theft. The cash register changed all that. By automating transaction tracking and offering a secure place to hold money, it improved accuracy, reduced losses, and built a sense of trust between merchants and their customers. It wasn’t just a tool; it was a breakthrough that enabled businesses to operate more efficiently and confidently.Today, Buy Now, Pay Later (BNPL) is playing a similar role in transforming financial systems for small businesses. By offering flexible payment options, BNPL allows owners to spread out costs for inventory, equipment, or services without the need for lengthy loan approvals or burdensome credit card interest. This flexibility can mean the difference between growth and stagnation, particularly for businesses navigating seasonal slowdowns or tight cash margins.In the heart of Nebraska, for example, First National Bank of Omaha (FNBO) took a bold step in 2021 by partnering with fintech firm Skeps to offer BNPL services to its merchants. This move signaled a shift in how community financial institutions (CFIs) are meeting evolving consumer expectations and competing with agile fintechs.BNPL: A Lifeline for Local BusinessesThe BNPL model is well-known for its convenience to consumers, but it’s also proving invaluable to small businesses. BNPL payments can help offset the pressure of upfront costs for inventory, equipment, services, and even marketing and advertising expenses.For many small businesses weathering economic challenges or seasonal slowdowns, this degree of flexibility can mean the difference between survival and insolvency.BNPL solutions also help small businesses manage their cash flow by allowing them to spread out payments over time. Instead of waiting for a lengthy loan approval process or racking up credit card debt, small business owners can access essential goods and services immediately while securing manageable, interest-free repayment terms.For example, a retailer might be looking to add new inventory to boost sales during the upcoming holiday season. With BNPL, they can acquire products now and pay over several months, easing the cash flow strain. Or a small restaurant may need to purchase new kitchen equipment but can’t afford to pay the full amount upfront.How to Leverage BNPL as a CFIIn a competitive and uncertain business environment where agility and flexibility are key to survival, being able to make necessary purchases without waiting for a lengthy loan process is a significant competitive advantage.As more small businesses adopt BNPL to manage their cash flow, CFIs are uniquely positioned to become essential partners in their growth journey. Here are five things CFIs should consider when it comes to leveraging BNPL more effectively:1. Partner with Trusted BNPL ProvidersCFIs should seek partnerships with established BNPL providers to offer seamless payment options to their business clients. By collaborating with fintechs that specialize in BNPL, CFIs can offer customers more options to purchase inventory, equipment, and services without depleting their cash reserves. This type of functional partnership also helps CFIs stay relevant and competitive, where larger banks and fintechs have already gained traction.2. Offer Tailored Solutions for Local BusinessesCFIs can differentiate themselves by offering BNPL solutions that are tailored to the specific needs of their local audience. Personalizing offerings ensures that SMBs can not only manage their cash flow efficiently, but will also feel like their go-to financial partner actually understands their day-to-day needs.For example, a CFI can customize repayment schedules based on the seasonality of its top business type or the timing of major events, such as product launches or the holiday season.3. Educate Small Business Owners on BNPL BenefitsMany small businesses are completely unaware of the full potential of BNPL or how it can help them grow. Some older business owners have not even heard of the option. CFIs can take the lead in educating clients about the benefits. Hosting workshops or providing resources on how BNPL works and when it makes the most sense for expansion can help SMB owners feel more confident and make more informed decisions.4. Integrate BNPL with Other Financial ServicesCFIs should consider offering BNPL in conjunction with their existing products and services, such as business loans, credit lines, and merchant services. This integrated approach creates a comprehensive financial package, positioning CFIs as the one-stop shop for nearly all SMB financing needs. By combining BNPL with other tailored offerings, CFIs can also help business owners manage both short-term and long-term financial challenges, making them an integral part of every business story in their community.
5. Ensure Compliance with Emerging RegulationsThe regulatory environment surrounding BNPL services is still developing, as lawmakers and regulators continue to evaluate the consumer protection aspects of these payment options. The Consumer Financial Protection Bureau (CFPB) is implementing rules to enhance transparency and ensure fair practices that protect consumers from potential debt traps.For instance, recent rules require BNPL providers to disclose the total cost of credit, repayment terms, and any late fees in a more accessible format. With the January 2025 update, the CFPB also proposed extending these protections, including implementing stricter credit reporting guidelines and limiting late payment fees. This is especially important for SMBs that want to offer BNPL services through partnerships with popular new fintechs. Helping clients stay on top of emerging regulations is one of many ways CFIs can build trust while also educating their customers on suitable BNPL options.BNPL ConvenienceAs small businesses continue to navigate persistent economic and geopolitical uncertainty, BNPL has remained a mainstay — a valuable tool for both SMB recovery and expansion, as well as for consumer lifestyles. By offering flexible payment solutions in a smart and targeted manner, CFIs can also attract new generations of small business owners seeking personalized financial services who are already familiar with BNPL as customers themselves.
5. Ensure Compliance with Emerging RegulationsThe regulatory environment surrounding BNPL services is still developing, as lawmakers and regulators continue to evaluate the consumer protection aspects of these payment options. The Consumer Financial Protection Bureau (CFPB) is implementing rules to enhance transparency and ensure fair practices that protect consumers from potential debt traps.For instance, recent rules require BNPL providers to disclose the total cost of credit, repayment terms, and any late fees in a more accessible format. With the January 2025 update, the CFPB also proposed extending these protections, including implementing stricter credit reporting guidelines and limiting late payment fees. This is especially important for SMBs that want to offer BNPL services through partnerships with popular new fintechs. Helping clients stay on top of emerging regulations is one of many ways CFIs can build trust while also educating their customers on suitable BNPL options.BNPL ConvenienceAs small businesses continue to navigate persistent economic and geopolitical uncertainty, BNPL has remained a mainstay — a valuable tool for both SMB recovery and expansion, as well as for consumer lifestyles. By offering flexible payment solutions in a smart and targeted manner, CFIs can also attract new generations of small business owners seeking personalized financial services who are already familiar with BNPL as customers themselves.
