Buy Now, Pay Later (BNPL) has rapidly evolved from a niche fintech offering into a mainstream payment option now embraced by traditional banks. Initially popularized by fintech companies like Affirm, Afterpay, and Klarna, BNPL lets consumers split purchases into smaller installments, often with no interest. This convenient credit-at-checkout model caught fire among shoppers – especially younger, digital-native consumers – and has grown explosively in recent years.

In 2023 alone, U.S. consumers spent an estimated $75 billion via BNPL for online shopping, about 14% more than the prior year. During Cyber Monday 2023, nearly 8% of all online spending was financed through BNPL plans, underscoring how common this payment method has become in retail. As BNPL usage surged, banks took notice. Once wary of this fintech-driven trend, banks offering in-house BNPL programs to meet customer demand are becoming more common.

From Fintech Fad to Financial Mainstream

It wasn’t long ago that BNPL was considered an upstart “fintech fad” disrupting the consumer credit landscape. Throughout the late 2010s and early 2020s, fintech providers pioneered BNPL by partnering directly with merchants to offer point-of-sale installment plans. Consumers flocked to these services for their simplicity and flexibility – a typical BNPL purchase allows a buyer to pay 25% of the cost upfront and the rest in three equal payments over six weeks, with zero interest as long as payments are on time. This model appealed to shoppers who were avoiding credit card debt or looking for short-term financing without fees.

By 2022, tens of millions of Americans had tried BNPL, and one survey found roughly 1 in 5 U.S. adults used a BNPL service in a single month. The rapid adoption was fueled by e-commerce growth (especially during the pandemic) and by the aggressive expansion of BNPL offerings across major online retailers.

As BNPL providers grew, they started encroaching on banks’ turf in consumer finance. Fintech BNPL companies not only facilitated installment payments but began launching their own debit cards, banking accounts, and apps, blurring the line between fintech and banks. For example, Affirm and Klarna have each introduced debit cards that let users toggle between paying now with their bank account and converting purchases into installment plans in their apps.

These moves aimed to make fintech BNPL players a one-stop shop for payments and financial services—a direct challenge to the traditional relationship consumers have with banks. Seeing fintechs manage both lending and payments in transactions rang alarm bells for many banks, who realized that BNPL was not just a passing trend but a competitor to their credit cards and consumer loans.

The surging consumer demand for BNPL – particularly among Millennials and Gen Z – signaled that flexible payment options were here to stay. Surveys consistently showed that younger customers value the budgeting convenience of BNPL and are even willing to switch financial providers to get better digital payment tools.

In fact, one study found that over 70% of active BNPL users would prefer an equivalent service offered by their own bank, citing greater trust in regulated banks than in fintech brands. All these factors made it clear to legacy banks that ignoring BNPL risked customer attrition and lost opportunities. By 2024, the question wasn’t if banks would embrace BNPL, but how quickly they could catch up.

Banks Jump on the BNPL Bandwagon

Facing a shifting market, banks have moved decisively to incorporate BNPL into their product offerings, with many choosing to build or brand their own solutions in-house. Instead of sending customers to third-party fintech lenders, banks are integrating installment payment features directly into their existing platforms, cards, and apps, thereby retaining control of the customer relationship and data. Over the past two years, both major institutions and community banks have launched BNPL programs or pilot initiatives.

A notable example is U.S. Bank, which introduced its “Avvance” BNPL program in late 2023, one of the first merchant-facing BNPL products offered by a central U.S. bank under its own brand. Avvance enables shoppers to finance purchases at checkout with instant approval, and U.S. Bank has also embedded BNPL options into its credit cards, signaling that large banks now view BNPL as essential to staying competitive and expanding lending opportunities.

Beyond standalone BNPL products, many traditional card issuers have also built installment payment options into their existing credit card frameworks. Programs such as American Express’s Plan It and Chase’s My Chase Plan allow cardholders to convert purchases into fixed monthly payments, often with a small fee or interest charge. Similar offerings from Citi, Wells Fargo, and others have made BNPL functionality a default feature of modern credit cards, meeting consumer expectations for flexible pay-over-time options while keeping the lending on the bank’s balance sheet.

The competitive pressure intensified in 2023 when Apple entered the market with Apple Pay Later, enabling iPhone users to split purchases into four interest-free payments directly in the Wallet app. Although Apple is not a bank, it created a lending subsidiary and partnered with a bank for underwriting, effectively becoming a BNPL provider itself. The move validated BNPL’s mainstream relevance and signaled to banks that tech giants are willing to own the lending relationship if traditional players move too slowly. For banks, the message was clear: BNPL is no longer optional, especially if they want to retain younger, digital-first customers.

By 2025, a significant number of banks, from global powerhouses to regional players, will have either launched or are actively developing in-house BNPL offerings. What began as a fintech-led innovation has now been absorbed into the mainstream banking landscape. The next phase of competition will center on execution: how quickly and efficiently banks can deploy BNPL experiences that rival fintechs and tech platforms, which is why many are accelerating partnerships with fintech providers to enhance speed, technology, and user experience.

FinTech Partnerships Powering Bank BNPL Programs

Rather than reinvent the wheel, many banks are accelerating their entry into the BNPL market by partnering with fintech firms that already specialize in installment payment technology. These collaborations allow banks to adopt mature, plug-and-play solutions while still presenting the final product under their own brand. A leading example is the partnership between Jack Henry, a primary U.S. banking technology provider, and equipifi, a BNPL-focused fintech.

Jack Henry supplies core software and digital banking platforms to hundreds of community banks and credit unions, and in 2023, it integrated Equifi’s white-label BNPL service directly into its system. As a result, any financial institution using Jack Henry’s platform can activate BNPL features in its existing mobile app or online banking portal, enabling customers to split purchases into installments using their regular debit card or account. Because the service is embedded in the bank’s digital environment, all BNPL activity —from activation to repayment —remains within the bank’s ecosystem.

After being rolled out first to credit unions via Jack Henry’s Symitar core, the solution later expanded to the SilverLake platform in 2025, giving hundreds of additional community banks access to BNPL with minimal development effort. This partnership has effectively made BNPL a ready-made feature that even smaller institutions can deploy quickly, demonstrating how fintech integrations are helping local banks keep pace with large national lenders.

Beyond core banking platforms, global card networks and processors are also enabling banks to launch BNPL features more rapidly. Programs such as Mastercard Installments and Visa Installments allow banks to offer pay-over-time options on existing credit or debit cards, meaning customers can split a purchase into installments at checkout without needing a separate BNPL account.

Partnerships like Marqeta’s collaboration with BNPL software firm Credi2 further streamline this process by giving issuers a turnkey way to activate installment functionality on the Mastercard network. Because the program works anywhere the card is accepted, banks do not need to negotiate one-off deals with individual merchants, dramatically speeding up deployment and broadening consumer access.

Some fintech BNPL providers are also choosing to work with banks rather than compete with them. Affirm, one of the largest standalone BNPL firms, partnered with banking technology giant FIS to allow FIS client banks to embed Affirm-style installment loans into their own digital banking experiences.

Likewise, Splitit has teamed up with DXC Technology so banks can enable debit card holders to convert any eligible transaction into installment payments, using their existing credit line rather than opening a new loan. These B2B partnerships mark a shift in the BNPL landscape: fintechs are no longer just disruptors, but also infrastructure providers helping banks modernize.

Why Banks Offering In-House BNPL Is a Game Changer

When a bank offers BNPL directly, it changes the dynamic for both the institution and its customers. There are several key advantages to the in-house BNPL approach:

• Customer Retention and Engagement:

Banks integrating BNPL aim to keep their customers from straying to outside fintech apps. If a customer can get the same flexible payment plan from their trusted bank, they have less reason to sign up for a third-party service. In-house BNPL becomes a loyalty tool—it keeps spending within the bank’s ecosystem.

A customer using their bank’s BNPL will likely use the bank’s debit or credit card for the purchase and repay via their bank account, generating interchange fees and maintaining the primary account relationship. Banks see this as crucial for retaining younger customers who might otherwise drift to fintech platforms for modern payment experiences.

• Trust and Security:

Surveys have found that consumers place greater trust in their banks to handle financial services such as loans and payments. Banks are heavily regulated and have longstanding reputations to uphold, which can reassure customers who might be wary of newer fintech brands. In-house BNPL carries the bank’s imprimatur, giving consumers confidence in areas such as data security, fraud protection, and transparent terms.

This trust factor is especially important as concerns have grown about some fintech BNPL providers failing to conduct thorough credit checks or making it too easy to accumulate debt. A bank is more likely to treat BNPL plans with prudent underwriting – in many cases, counting them as loans that consider the ability to repay – thereby offering a potentially safer form of BNPL. For consumers, using a bank’s BNPL could mean fewer surprises and clearer recourse if something goes wrong, compared to dealing with a separate lender.

• Integrated Financial Management:

A significant benefit of bank-provided BNPL is the seamless integration into one’s overall financial picture. Instead of juggling multiple apps (one for each BNPL service) and trying to keep track of various payment schedules, consumers can see their installment plans alongside their checking, savings, and credit accounts in one place. This holistic view can improve financial planning and budgeting.

With an in-house BNPL program, a bank’s mobile app might show: “You have two installment plans in progress – one for your new laptop ($200/month) and one for your travel booking ($100/month) – with payments automatically scheduled.” This centralization helps customers manage debt responsibly and avoid overlooking any obligations. It effectively turns BNPL into just another feature of a checking account or credit card, rather than an external liability.

• Personalization and Rewards:

Banks can leverage their rich customer data to personalize BNPL offers. Because banks know their customers’ spending patterns and credit histories, they might offer tailored installment plans—for example, pre-approved “buy now, pay later” offers for a large upcoming purchase, or lower-interest-rate installment loans for loyal customers.

Some banks may also integrate rewards or incentives with BNPL. Imagine earning credit card reward points or cash-back when using your bank’s BNPL plan – something fintech providers typically don’t offer. This adds an extra sweetener for consumers to choose the bank’s option. From the bank’s perspective, it’s a way to differentiate their BNPL with benefits competitors lack.

• New Revenue Streams (Balanced with Responsibility):

While pay-in-four BNPL is often interest-free, banks can monetize longer-term installment plans through interest or fees, much like traditional loans. Additionally, if banks offer BNPL at the merchant point of sale (as U.S. Bank does with Avvance), they might earn a merchant discount or fee per transaction. These can become new revenue streams for banks, helping to offset slowing growth in credit card usage among younger consumers.

However, banks are approaching this opportunity cautiously – mindful of not encouraging excessive consumer debt. The mainstreaming of BNPL through banks could actually lead to more responsible lending practices in this arena, since banks must comply with regulations and are skilled in credit risk management. In the long run, bringing BNPL under bank supervision may address some of the sector’s criticisms of fintechs’ lax underwriting.

What It Means for Merchants

For merchants, the growing adoption of BNPL by banks and payment networks is mainly positive, but it introduces new dynamics to navigate. BNPL has already proven its value in retail, consistently driving higher conversion rates and larger average order sizes. Until recently, merchants typically had to integrate with fintech providers like Affirm, Afterpay, or Klarna and pay fees of 3–6% per BNPL transaction. With banks now entering the market, merchants may gain more choice and leverage.

A wider variety of BNPL providers, both fintech and bank-led, creates competition that could lead to lower merchant fees, faster settlement, and more favorable contract terms. Banks also have a lower cost of capital than most fintech lenders, which may enable them to offer BNPL at better pricing over time.

Another major shift is that BNPL may no longer require merchants to integrate separate checkout buttons or platforms. As card networks and banks embed installment plans directly into existing debit and credit cards, a merchant can automatically accept BNPL through standard card processing. If a shopper has a Visa or Mastercard with built-in installment features, the merchant is paid in full at the time of purchase, just as with any standard transaction, while the customer manages repayment through their bank or card app. This “invisible BNPL” approach could significantly expand adoption, especially among smaller merchants and brick-and-mortar stores that have avoided fintech BNPL integrations due to cost or complexity.

Bank-backed BNPL also has customer-experience benefits. Shoppers may feel more comfortable financing a purchase through their own bank rather than a third party they don’t recognize, reducing friction and cart abandonment. Because banks must follow established lending regulations, customers may also get more precise loan terms and disclosures, which can reduce disputes and improve post-purchase satisfaction. However, this also means merchants will need to keep pace with a growing mix of BNPL options, making sure staff and customer support teams understand how bank-issued installment payments work at checkout.

Finally, some larger retailers may choose to partner directly with banks to promote exclusive financing offers, such as limited-time 0% installment plans funded by a particular bank. These co-branded BNPL promotions can boost merchants’ sales while helping banks acquire new customers and increase loan volume. As BNPL spreads across banking, fintech, and card networks, the lines between these players are blurring, and merchants will benefit most from staying flexible and informed as the payment landscape continues to evolve.

A New Era of BNPL: The Road Ahead

The mainstreaming of BNPL via banks signifies a maturation of the concept – but it’s also just the beginning of a new phase. In the future, a few trends are likely to shape the BNPL landscape:

• Convergence of Credit Products:

The distinctions between credit cards, personal loans, and BNPL are blurring. Banks are integrating BNPL into credit cards, fintechs are offering BNPL via debit cards, and card networks are supporting installment plans. We are moving toward a future where consumers have a unified credit experience: they can choose at the point of purchase whether to pay now, pay later in installments, or even switch a transaction to installments after the fact, all within one platform.

In other words, BNPL won’t necessarily remain a standalone product – it will become an option embedded in many payment forms. The winners in this space will be those who can deliver this flexibility most seamlessly, whether it’s a bank leveraging its core systems or a fintech with a slick user interface (or partnerships that combine both).

• Regulatory Oversight and Consumer Protection:

As BNPL becomes mainstream, regulators are paying closer attention. Bank regulators and agencies like the Consumer Financial Protection Bureau (CFPB) in the U.S. have already been reviewing BNPL practices to ensure consumers are protected (for example, by looking at whether BNPL providers clearly disclose terms and check borrowers’ ability to repay). Banks entering BNPL actually help on this front, since they are accustomed to complying with lending laws and typically perform credit checks or report BNPL loans to credit bureaus.

We can expect a more level regulatory playing field to emerge, where fintech BNPL providers face similar rules as banks, closing any loopholes. This would address concerns that BNPL could lead to consumer over-indebtedness if left unchecked. For banks, increased oversight is familiar territory. It could even favor them, as they have the infrastructure to handle compliance – whereas some fintechs might struggle with the costs of new regulations. In short, mainstream adoption and regulation will likely go hand in hand, making BNPL safer and more uniform as a product category.

• Profitability and Sustainability:

Both banks and pure-play BNPL firms will need to prove that these installment offerings are profitable in the long term and not just a growth gimmick. Fintech BNPL providers saw skyrocketing volumes but also significant losses in their early years, driven by loan defaults and the costs of rapid expansion. Banks, with their experience in underwriting and managing credit risk, will aim to refine the BNPL model to be more sustainable.

This might involve charging interest on longer-term plans, implementing stricter approval criteria, or using advanced analytics (AI and machine learning) on customer data to minimize losses. The push for profitability could also spur innovation in product design—for example, introducing subscription-style BNPL (fixed monthly payments for a bundle of purchases) or hybrid credit offerings.

Consumers might see a wider variety of installment options beyond the standard “four equal payments” structure, as providers experiment with term lengths, interest/fee trade-offs, and rewards to find the right balance of consumer appeal and financial viability.

• Global Expansion and Inclusion:

While BNPL is mainstream in the U.S. and Europe, the trend is spreading globally, often through banks. In markets across Asia, Latin America, and Africa, banks are launching BNPL-like installment products to cater to underserved consumers who may not have credit cards. The technology and lessons learned from the U.S. and European BNPL boom are being exported.

Banks in countries like India or Brazil might partner with fintechs to quickly roll out app-based installment plans tied to bank accounts, bringing formal credit to younger populations for the first time. As BNPL goes mainstream worldwide, it could play a role in financial inclusion, offering a stepping stone to credit for those without a traditional credit history – as long as it’s done responsibly. U.S. banks and fintechs expanding internationally will carry their collaborative approach abroad, potentially forging partnerships with local banks in various regions.

Conclusion

BNPL’s journey from a disruptive fintech idea to a standard offering at your local bank illustrates how consumer-driven innovations can reshape the entire financial industry. Banks have embraced in-house BNPL to stay relevant in an era of digital-first preferences, meeting their customers’ desire for convenient, flexible payments. In doing so, they are not just copying fintechs – they are enhancing the model with their strengths in trust, regulation, and scale. The collaborations between banks and fintech providers show that the future of finance often lies in partnership rather than pure competition.

For consumers and merchants, the mainstreaming of BNPL promises more choices and a more integrated experience. Shoppers benefit from installment purchasing with the familiarity of their own bank’s interface and safeguards. Merchants can expect broader adoption of pay-later options, driving sales, potentially with fewer hurdles and lower costs as technology standardizes. There will still be challenges ahead – ensuring prudent use, maintaining profitability, and protecting consumers – but the banking industry is well-equipped to tackle them.

BNPL has proven it is not a passing trend but a fundamental shift in payment and credit. It has pushed banks to innovate faster and has given fintechs a foothold to collaborate with established players. As BNPL goes fully mainstream, we’re likely to stop thinking of “BNPL” as something separate at all – it will simply be part of how buying and paying works in the modern economy. And with banks now in the game, the future of buy, pay later will be built on the combined foundation of fintech creativity and banking’s time-tested principles, to the benefit of consumers and businesses alike.

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