How Pay-Over-Time Can Help Banks Fight the BNPL Surge

BNPL Usage Increase

20%

BNPL usage among Gen Z rose from 26% in 2023 to 46% in 2025.

Consumer Preference for Traditional Credit

54%

Percentage of consumers who prefer traditional credit cards over BNPL options.

Projected BNPL Market Size

$1.4 billion

Global BNPL market projected to exceed $1.4 billion by 2029.

§ 01 Executive Snapshot

What: Banks are enhancing pay-over-time options to compete with the growing Buy Now, Pay Later (BNPL) market.
Who: Key players include banks, BNPL providers like Affirm and Klarna, and payment solution companies like Billtrust.
Why it matters: The shift towards BNPL highlights changing consumer payment preferences, pressing banks to innovate to retain market share.

BNPL usage among Gen Z increased from 26% in 2023 to 46% in 2025, marking a 77% rise.
54% of consumers prefer traditional credit cards over BNPL options, emphasizing the importance of trust in financial transactions.
Banks are embedding installment options into their digital banking apps and credit cards to streamline user experience and enhance adoption.

The rapid adoption of BNPL signifies a broader shift in consumer behavior towards flexible payment options, particularly among younger demographics.
Banks have established relationships and trust with consumers, which can be leveraged to counter the appeal of third-party BNPL services.

Immediate implications include the need for banks to integrate pay-over-time options into the checkout process, which could improve customer acquisition and retention.
Long-term, banks may need to innovate pricing models and enhance personalization to remain competitive against BNPL offerings.

Regulatory challenges and the need to adapt to consumer preferences can pose risks to banks' ability to effectively compete with BNPL providers.
Competition from BNPL services that offer zero-interest and fee-free plans could undermine banks' traditional revenue models based on interest and fees.

Monitoring the integration of installment options into banking apps and checkout processes will be crucial to assess banks' competitive positioning.
Future developments in merchant partnerships and pricing strategies will signal the banks' success or failure in adapting to the BNPL landscape.

§ 07

What are banks doing to compete with BNPL services?

Banks are enhancing pay-over-time options and embedding installment features into their digital banking apps and credit cards.

Why is the rise of BNPL significant for banks?

The rise of BNPL reflects changing consumer payment preferences, compelling banks to innovate in order to retain market share.

How has BNPL usage changed among Gen Z?

BNPL usage among Gen Z increased from 26% in 2023 to 46% in 2025, marking a 77% rise.

Who are the key players in the BNPL market?

Key players include banks, BNPL providers like Affirm and Klarna, and payment solution companies like Billtrust.