BNPL stands for buy now, pay later. It’s a short-term financing option that enables customers to make instant purchases and pay for them over time, usually in fixed payment installments and often interest-free. BNPL loans are also called point-of-sale (POS) installment loans. Compared with credit cards and lines of credit, BNPL loans are often easier for consumers to get approval for. If approved for BNPL, shoppers typically make a small down payment up front, then the remaining payments over time.  

There were an estimated 360 million users of BNPL in 2022. We estimate that a large US bank with total assets of $3–4 trillion could boost its total credit card income by 10% in 2025 by embedding BNPL into its cards. A large European bank with total assets above $2 trillion could benefit from a  ̴16% uplift in credit card income in the same timeframe. Incumbent banks have the potential to grow BNPL beyond what fintechs ever could. 40% of our survey respondents said they would be willing to use BNPL if it were offered by their primary bank

Banks can leverage their existing capabilities to grow credit card utilization and their consumer finance business overall. Banks will benefit beyond the immediate potential boost in card income. When integrated with a credit card, BNPL becomes a flexible product that can be offered at different moments in the customer journey. It can be tailored to different customer segments to optimize credit limit usage, customer acquisition and customer loyalty. 

As part of a credit card proposition, BNPL can be linked to a bank’s loyalty program to attract mass-market and affluent customers. Banks could consider launching bundled offers tailored to a time of resurgent inflation and interest—for example, short-term interest-earning deposit accounts bundled with new BNPL offers. 

Banks have proven systems and processes to score credit and assess affordability for BNPL users. 

Embedding BNPL into cards could be an opportunity for banks to promote financial wellbeing and help their customers optimize their finances through responsible lending. A responsible BNPL model, embedded into a bank's credit offering, would allow both the consumer and the financial institution more visibility into the consumer’s full financial picture. Consumers can view transactions and manage repayments via their bank's financial tools, enabling them to better manage their financial health by borrowing and spending more prudently.