The BNPL Boom: Global Rise, Impact on Credit, and How Banks Can Thrive

Buy Now, Pay Later (BNPL) has rapidly evolved from a niche fintech offering to a mainstream payment option worldwide. This short-term, installment-based financing lets consumers split purchases into interest-free payments, fueling its popularity among shoppers seeking flexibility. Today, banks and financial institutions are closely watching the BNPL boom. The rise of BNPL presents not only a competitive challenge to traditional credit products, but also a significant opportunity for banks to innovate and grow. In this article, we examine BNPL’s global rise and consumer adoption, how BNPL intersects with the traditional credit landscape, and strategies banks can leverage to harness BNPL for growth, all while preserving the trust and stability that banks traditionally offer.

BNPL’s Global Rise and Consumer Adoption

BNPL usage has exploded globally in recent years, reshaping consumer payment habits. There are now hundreds of millions of BNPL users worldwide, over 360 million people used BNPL in 2022, a number expected to surge by 157% to 900 million by 2027 (demandsage). In the United States, BNPL has quickly gained a foothold: more than a quarter of U.S. consumers have used a BNPL service as of 2025 (morganstanley). Although BNPL still accounts for a relatively small share of total retail spending, its growth is striking. BNPL financed about 6% of U.S. e-commerce purchases in 2024, up from just 2% in 2020 (morganstanley). This rapid jump in market share underscores how quickly consumers have embraced these “buy now, pay later” options.

A key driver of BNPL’s rise is its popularity among younger shoppers. Younger consumers are leading BNPL adoption. About 41% of those aged 16–24 and 39% of those 25–34 have used BNPL, compared to only around 12% of consumers aged 55–64 (morganstanley). This generational tilt reflects BNPL’s appeal to digital-native, credit-averse millennials and Gen Z. Many in these cohorts prefer the simplicity of installment plans over traditional credit cards, which often carry high interest rates. In fact, millennials and Gen Z already tend to shy away from credit cards due to a dislike of high-interest debt, making BNPL a more palatable alternative for them (kansascityfed). High-income households have also been significant adopters of BNPL, debunking the notion that only cash-strapped consumers use these services (morganstanley). From everyday apparel to electronics, BNPL has broadened access to credit for routine purchases. Consumers are increasingly using BNPL for everyday items like clothing and even groceries rather than reserving it for big-ticket buys (morganstanley). 

BNPL’s global rise has been fueled by the promise of convenience and zero-interest financing. Shoppers can manage expenses by splitting payments, incurring minimal fees if they pay on time (bis). Merchants, for their part, have eagerly adopted BNPL at checkout to boost sales, even paying fees to BNPL providers in exchange for higher conversion rates and access to new customers (bis). The result is a worldwide BNPL boom that shows little sign of slowing. Some estimates project the global BNPL market (in terms of transaction volume) will reach over $560 billion in the next couple of years, cementing BNPL as one of the top payment methods in e-commerce (nimbleappgenie). With consumer awareness high, in one survey 72% of Americans said they plan to use BNPL in the coming year (numerator), banks can no longer ignore this trend. BNPL is here to stay, and its widespread adoption sets the stage for a new era in consumer credit.

BNPL and the Traditional Credit Landscape

The rise of BNPL is reshaping the traditional consumer credit landscape, prompting both concern and opportunity for banks. On one hand, BNPL’s growth threatens to chip away at credit card usage and revenues. Short-term installment plans offer a similar value proposition to credit cards, an immediate purchase gratification with delayed payment, but often without interest if paid on schedule (kansascityfed). For younger generations who are wary of revolving credit card debt, BNPL’s fixed, transparent installments are attractive (kansascityfed). In fact, 38% of BNPL users surveyed said BNPL will eventually replace their credit cards (kansascityfed), a sentiment that should grab the attention of any card-issuing bank. There is already evidence of BNPL making a dent in banks’ profits, with one analysis estimating that banks have lost $8–10 billion in annual revenue to fintech BNPL providers in recent years (kansascityfed). Clearly, the conventional credit card business faces competitive pressure from this new pay-later model.

Yet, it’s not an outright zero-sum game. Traditional credit still dominates overall consumer spending, and banks retain significant strengths to compete in the evolving landscape. Credit cards remain ubiquitous and deeply ingrained. They continue to dominate overall spending volumes even as BNPL grows (thefinancialbrand). Moreover, banks benefit from longstanding consumer trust and established relationships. Customers are generally confident in their banks’ credibility and data security, something newer fintech providers are still building. According to recent surveys, a majority of consumers (about 54%) prefer using traditional credit cards or banking methods over BNPL alternatives (thefinancialbrand). This trust factor is especially pronounced for large or significant purchases, where many shoppers feel more comfortable relying on their bank’s credit card or financing options rather than an unfamiliar third-party BNPL service (thefinancialbrand). 

Rather than seeing BNPL purely as a threat, many banks are viewing it as an opportunity to modernize their credit offerings. BNPL’s popularity highlights a consumer desire for greater flexibility and clarity in payments. Banks that adapt can capture this demand within their own product suite. Already, forward-looking incumbents are responding: banks and payment networks have begun engaging with, acquiring, or directly competing with BNPL providers to ensure they remain part of this trend (kansascityfed). In doing so, they aim to blend the best of both worlds, connecting the fintech-like convenience of BNPL with the stability, trust, and scale of traditional banking.

Strategies to Leverage BNPL for Growth

Banks can capitalize on the BNPL trend by deploying strategic initiatives that play to their strengths and address consumers' evolving preferences:

• Integrate BNPL into Bank Offerings: Banks are uniquely positioned to integrate BNPL options directly into their existing products and channels. Many banks have started adding installment-payment features to their credit cards, mobile banking apps, and online checkout processes. For instance, some major card issuers introduced installment plan options (like Citi’s Flex Pay or Chase’s My Chase Plan) that let credit card customers pay off purchases in fixed monthly installments (kansascityfed). Similarly, digital wallet providers like PayPal have launched their own BNPL style offerings (“Pay in 4”) within their platforms (kansascityfed). By embedding BNPL functionality into familiar banking apps and cards, banks can capture customers at the point of purchase. This is critical, if a consumer doesn’t see a bank’s installment plan available during checkout, they may opt for a fintech BNPL option instead (thefinancialbrand). Banks should ensure their pay-over-time choices are visible and seamless in the online and in-store checkout experience. Integrating BNPL into the customer journey, whether via APIs provided by card networks for installment payments (kansascityfed) or through bank-issued installment offers, helps banks retain control of the payment relationship and prevents BNPL providers from disintermediating them.
• Leverage Trust and Customer Data: Trust and data are two major advantages traditional banks have over fintech upstarts. Banks should lean into these strengths when crafting BNPL strategies. Firstly, banks enjoy a trust premium: consumers already have established relationships with their banks, so a BNPL offer coming from one’s own bank can feel safer and more transparent (thefinancialbrand). Secondly, banks possess rich customer data, detailed histories of spending, creditworthiness, and account behavior, enabling them to personalize BNPL offerings in ways fintechs cannot (thefinancialbrand). With deeper insights, a bank could pre-approve installment plans, tailor the payment schedule or credit limit to the individual, or offer loyalty rewards for using the bank’s BNPL option. 
• Expand Merchant Relationships: BNPL economics rely heavily on merchant fees, retailers pay 2% to 8% per transaction to BNPL providers for bringing in sales and handling credit risk (thefinancialbrand). Banks can turn this into a competitive edge by working directly with merchants to offer installment plans at lower cost. With their broad merchant acquiring networks and financing capacity, banks can negotiate arrangements where merchants promote the bank’s BNPL option (such as installments on the bank’s credit card) in exchange for more favorable fees than those charged by dedicated BNPL firms. This strategy is already emerging: in some markets, banks are partnering with merchants to bypass third-party BNPL providers, positioning themselves as a more cost-effective alternative for merchants (thefinancialbrand). Overall, strengthening ties with merchants allows banks to embed their BNPL solutions within retail channels, capturing growth and market share that might otherwise be lost to fintech competitors.
  
  

By pursuing these strategies, banks can transform the BNPL disruption into a growth opportunity. The goal is to meet consumers’ demand for flexible, on-the-spot financing within the bank’s own ecosystem, thereby retaining customer loyalty and transaction revenue. Banks that successfully integrate BNPL capabilities stand to attract younger customers, increase engagement, and drive new lending volume, all while maintaining the trust and regulatory compliance that underpin their brands.

BNPL has undeniably changed the consumer finance landscape, rising from a novel concept to a global phenomenon in just a few years. Its rapid adoption, particularly among younger generations and for everyday purchases, signals a lasting shift in how people prefer to pay. For banks and traditional lenders, the BNPL boom presents both a wake-up call and a chance to innovate. Rather than viewing BNPL providers as simply competitors, banks can view them as inspiration to enhance their own offerings. By embracing installment-based payments and integrating BNPL features, banks can stay relevant and competitive in the digital payments age (kansascityfed). Crucially, banks have the advantages of trust, scale, and customer insight to make their BNPL offerings especially compelling to both consumers and merchants.

In summary, BNPL is not just an upstart threat to be monitored, it’s an opportunity for forward-thinking banks to adapt and grow. By leveraging strategic partnerships, embedding flexible payment options, and utilizing their inherent strengths, banks can ride the BNPL wave to expand their customer base and revenue streams. The future of consumer credit is being reshaped by BNPL’s rise, and banks that proactively participate in this evolution will position themselves to thrive in the new credit landscape.