Buy Now, Pay Later (BNPL) has moved from a niche e-commerce feature to a defining force in consumer credit. Once dominated by fintech startups, BNPL is now reshaping how banks, credit unions, and retailers approach short-term lending, and how consumers expect to pay.
But, rapid adoption brings new complexity. For lenders and platforms, BNPL represents both a massive opportunity to engage new customers and a growing challenge in risk management, compliance, and data orchestration.
BNPL’s Continued Surge
In the face of economic headwinds, BNPL spending continues to climb. According to Yahoo Finance, global BNPL volume surpassed $300 billion in 2024, with usage projected to grow by 105% by 2028. In the U.S. more than 40% of consumers have considered BNPL, with 60% having more than one loan at a time.
While inflation and high interest rates have strained household budgets, BNPL’s promise of interest-free installments has appealed to consumers seeking flexibility. Retailers have embraced it as a conversion tool, with checkout conversion rates increasing as much as 30-40% when BNPL options are available.
However, the volume and speed of this growth are forcing financial institutions to rethink how they evaluate creditworthiness, manage portfolio risk, and comply with evolving regulations.
What’s Driving BNPL Demand?
Three core shifts are fueling BNPL’s sustained momentum:
- Changing Consumer Expectations: Modern borrowers want frictionless, transparent payment options that align with their spending patterns. BNPL delivers immediacy – credit without a lengthy application or the stigma of “taking out a loan.”
- Merchant & Ecosystem Expansion: BNPL began in fashion and electronics, but has expanded into travel, healthcare, auto repair, and even utilities. Merchants see value in embedded checkout experiences, while BNPL providers see diversification that reduces cyclical risk.
- Financial Inclusion Pressure: Many BNPL users fall outside traditional credit profiles – younger consumers, gig workers, or those with thin credit files. Lenders that can responsibly serve this population stand to gain long-term customer relationships, but only if they can accurately assess risk using nontraditional data.
Emerging Challenges for Lenders
Behind BNPL’s convenience lies growing tension. Delinquencies are climbing, regulatory oversight is tightening, and the competitive landscape is blurring the lines between banks and fintechs.
Rising Delinquencies and Thin Data
The Consumer Financial Protection Bureau (CFPB) found that consumers with at least one BNPL loan in a month were more likely to hold higher balances on other types of unsecured consumer credit. Traditional credit data often doesn’t capture BNPL usage, leaving lenders without a complete picture of consumer indebtedness.
Lenders must therefore integrate alternative and real-time data sources – such as transaction history, cash flow insights, open banking data, or behavioral indicators – into their decisioning models to prevent blind spots and maintain portfolio quality.
Regulation Begins to Catch Up
Regulators globally are taking a closer look at BNPL’s consumer impact. In the U.S., the CFPB’s proposed oversight would require BNPL lenders to adhere to the same fair lending, disclosure, and data reporting standards as credit card issuers. For banks and credit unions, this is familiar territory. For fintechs, it represents a steep compliance curve.
The shift will demand more robust data orchestration, auditability, and transparency throughout the decisioning lifecycle. Another factor that cannot be overstated is the importance of strong partnerships, especially for those newer to this level of audits and compliance.
Fragmented Technology Ecosystems
As financial institutions expand into BNPL or partner with fintech providers, technology fragmentation becomes a barrier. Multiple data sources, legacy systems, and disconnected risk models make it difficult to deliver the fast, consistent, compliant decisions BNPL demands.
To compete at scale, lenders must orchestrate these systems – integrating data, analytics, and decision engines across the customer journey.
Innovation & the Path Forward with BNPL
BNPL’s future depends on balance: innovation that expands access, underpinned by decisioning discipline that protects both consumers and lenders. Leaders in this space are already taking several key steps:
Embedding BNPL Broader Lending Strategies
Traditional lenders are no longer sitting on the sidelines. Many are building BNPL capabilities into their credit card and personal loan products, using real-time decisioning to tailor offers based on existing customer data. This approach turns BNPL from a transactional service into a relationship-building tool, driving loyalty and increasing cross-sell potential.
Leveraging Advanced Data for Smarter Underwriting
To assess risk accurately, lenders are combining bureau data with alternative inputs – cash flow, transaction history, and merchant-level data. The ability to aggregate and act on these data sources in milliseconds enables responsible approvals without slowing down the experience customers expect.
Enhancing Fraud and Identity Protections
BNPL’s low barriers to entry make it a growing target for synthetic identity and account takeover fraud. Next-generation platforms are using real-time data orchestration and machine learning to detect patterns, verify identities, and block high-risk transactions before they happen.
Scaling Through Modernized Decisioning Infrastructure
Success in BNPL – like any fast-moving lending model – depends on flexible, automated decision making systems. Institutions that can deploy and adjust models quickly will stay ahead of market shifts, while those relying on rigid or siloed systems will struggle to keep pace.
How Zoot Helps Lenders Lead in the BNPL Era
The lenders best positioned to thrive in BNPL share a common strategy: they unify data, automate intelligently, and maintain transparency at every step of the credit lifecycle. That’s where Zoot helps institutions move faster, and smarter.
Zoot’s BNPL loan origination product gives financial institutions an off-the-shelf solution to launch and scale BNPL programs efficiently. Built on the same proven foundation as Zoot’s bespoke solutions and designed for speed, flexibility, and compliance, it helps lenders deliver instant, accurate credit decisions without adding operational complexity.
With Zoot, lenders can:
- Unify data sources across internal systems and providers for a complete real-time view of applicants and existing customers
- Automate decisions using configurable business rules, advanced analytics, and model management to accelerate approvals
- Strengthen fraud and identity defenses through integrated data orchestration that identifies risk patterns before losses occur
- Adapt quickly to regulatory changes with transparent, auditable workflows that make compliance a built-in part of the process, not an afterthought.
Zoot gives lenders the flexibility to design BNPL programs that align with their broader lending strategy – offering consumers the convenience they want while maintaining the control and compliance financial institutions require. As BNPL continues to evolve, lenders that can orchestrate data and decisions through a unified platform will lead the market, delivering better experiences for borrowers and better outcomes for their business.
Get in touch to explore how Zoot helps lenders orchestrate data and decisions to deliver smarter, faster BNPL experiences.
