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

⦿ Executive Snapshot

• What: Banks are enhancing their pay-over-time options to compete with the growing popularity of Buy Now, Pay Later (BNPL) services.
• Who: Key players include banks, BNPL providers like Affirm and Klarna, and industry experts like Sunil Rajasekar and Brant Peterson.
• Why it matters: The shift to BNPL is altering consumer payment preferences, necessitating banks to innovate to retain market share and customer trust.

⦿ Key Developments

• BNPL usage among Gen Z increased from 26% in 2023 to 46% in 2025, highlighting significant market adoption.
• 54% of consumers prefer using traditional credit cards and banking methods over BNPL services, indicating banks' existing trust advantage.
• Banks are embedding installment options directly into digital banking experiences, making it easier for customers to opt into pay-over-time plans.

⦿ Strategic Context

• The rise of BNPL reflects a broader trend in consumer finance where younger generations prefer flexible payment options that fit their purchasing behavior.
• Banks have historically dominated the credit market but face disruption as BNPL providers successfully integrate financing options into checkout experiences.

⦿ Strategic Implications

• Banks must enhance their integration of pay-over-time options at the point of sale to compete effectively with BNPL providers.
• Long-term, banks need to innovate pricing models and leverage customer data for personalization to drive adoption of their pay-over-time offerings.

⦿ Risks & Constraints

• Regulatory challenges and potential pushback from traditional credit card models may complicate banks' efforts to adopt BNPL-like offerings.
• Increased competition from both established BNPL providers and new entrants could hinder banks' market share retention.

⦿ Watchlist / Forward Signals

• Banks should monitor consumer feedback and adoption rates of newly implemented pay-over-time features in their digital banking platforms.
• Future developments in regulatory frameworks surrounding BNPL and pay-over-time options will be critical to shaping competitive strategies for banks.