Buy Now, Pay Later – Good, Bad, or Somewhere in the Middle?

Posted by Mark Ranta on 14 Oct 2021

If you hadn’t heard of Buy Now Pay Later (BNPL) before, you probably have by now because over the last 18 months, you couldn’t hide from it. Bringing in some of the largest FinTech valuations, the BNPL space is really on fire. For the skeptics, BNPL represents a questionable foray into getting consumers to overspend on things they don’t need or can’t afford. For the proponents, BNPL represents a far better alternative to credit cards, which often feature costly APRs to access the credit needed to make purchases. Realistically, the truth most likely lies somewhere in the middle of these two sentiments, but what does it mean to your financial institution’s payment strategy.

For starters, I will disclose that I have made a few snap purchases over the past 18 months leveraging BNPL provider offers during the checkout process. The offer to make installment payments at zero percent was certainly a driving factor in that decision. Contrary to the pessimistic POV mentioned above, I had the money in hand to make both purchases. However, the offer of essentially a zero percent loan for 24 months (so long as you make your equal installment payments) was an offer I am just not wired to say no to. The experience on both purchases has been amazing, and the installment payments for one of the items continues on its monthly cadence with a nice text reminder that the next installment payment is about to be made. 

So what’s the big deal? Well, for starters, BNPL offerings are moving up into the checkout stream, as mentioned above. The services themselves are being adopted by a large number of retailers that are looking to take advantage of pent-up demand for purchasing. By offering the BNPL option, they give consumers the choice and convenience with an instant credit offering. In the past, only the largest box stores and high-end retailers would offer this in the form of “store credit cards”. The introductory rate on those offers were, in essence, BNPL type installment offerings. However, the penalty for missing a payment or being late was the same as the standard card offerings or even higher APRs (typically between 20-30%). BNPL has found a nice niche with consumers, and the valuations of the space are eye-popping, indicating this isn’t going to be a trend that will slow down any time soon. 

So how does BNPL fit into your payments strategy? As we’ve discussed in our transformation discussions, getting your infrastructure ready to handle new payment types or use cases is a key step in the journey. BNPL is rapidly changing the payment space, taking a POS purchase and injecting a new option to do installment payments right at checkout. With access to new payment types and rails, new ways of conducting commerce will continue to become available. They will likely “disrupt” payment experiences that are dominated by a single payment option today (e.g., any credit/debit experiences that feature high fees/penalties). The key to a successful payments strategy is to be in a position where you can adapt to the market dynamics at play and have systems that will easily connect to or extend to the new market offerings. Making it easy to link your consumer’s account to their BNPL vendor of choice is a great example— your institution remains the primary account for the consumer while enabling them to transact how they want, where they want. This journey is just starting. What is your strategy going to be?  

Read Digital Transformation – Your Guidebook Has Arrived for the phases of a successful digital transformation journey. 

Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time paymentsdigital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email

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Mark Ranta Payments Practice Lead Mark is responsible for working with our market partners and financial institution customers discussing, exploring, and examining market trends and key drivers in the evolving digital payment space. Prior to joining Alacriti, Mark's nearly 15 year career has been focused entirely on the banking and payments space, working for solution providers and research firms supporting both the corporate and consumer banking markets. Mark is a Certified Treasury Professional and holds a Bachelor of Arts from Lafayette College.

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