BNPL is popular, but compliance worries hamper bank adoption

American Banker's 2026 BNPL Tradeoff Survey

Who (and how) is your institution offering BNPL to consumers?

Key takeaway: Nearly equal shares of respondents currently offer it or are choosing not to in the near future.

As BNPL grows in popularity among consumers, financial institutions are still on the fence about whether to offer the lending product to customers.

Close to half of respondents (44%) said they offer BNPL products to customers through either a proprietary platform, a white-labelled solution or an embedded partnership with firms such as Affirm and Klarna. About 15% said while they don't currently offer BNPL, that is due to change within the next 12 months. Close to half don't currently offer BNPL to customers and aren't planning to anytime in the next 12 months.

Broken down by institution, 72% of national banks currently offer BNPL, followed by 54% of regional banks, 18% of community banks and 11% of credit unions. Regional banks were the biggest dependents on embedded partnerships for BNPL offerings (24%), while credit unions were the biggest holdouts (68%).

Consumer-driven pushes for BNPL have driven executives to earnestly explore how to implement and offer such products, which ranges from building internal platforms or seeking the expertise of outside partners.

Late last year, U.S. Bank launched Split Card, a BNPL product that allows customers to convert purchases into three-month installment plans.

Transactions of more than $100 are automatically put into a three-month installment plan. Any transactions that are under $100 are aggregated at the end of the month, and placed into their own three-month installment plan. Customers have the option to extend the installments to six-month or 12-month terms for a flat 1.5% monthly fee. 

Courtney Kelso, head of consumer and small-business payments at U.S. Bank, told American Banker that pay-over-time products have continued to grow in popularity among consumers of all age ranges, but "especially for Gen Z."

"Our belief is that this is a really important product to introduce customers that may not already be a customer of U.S. Bank to our suite of offerings," Kelso said. "Many of these customers are relying on these types of payment plans, but they have them through a bunch of different providers. This brings it all into one place." 

What is driving BNPL adoption among banks and credit unions?

Key takeaway: Staying relevant is a big driver for those offering or planning to offer BNPL.

Staying competitive is the name of the game for executives pushing to offer BNPL.

The top driver for institutions offering or planning to offer BNPL to consumers is to remain competitive (76%) against peers or other firms that offer similar products. Revenue generating (47%), cross-selling other products/services (43%), building merchant relationships (28%) and embedding finance into partner ecosystems (27%) were other key motivators.

Between 2019 and 2023, data from the Consumer Financial Protection Bureau found that BNPL loan origination volume on a dollar basis grew from $2.7 billion in 2019 to more than $45 billion in 2023. Across the same period, the number of Pay in 4 BNPL loans went from 19.8 million in 2019 to 335.8 million loans in 2023.

Fiserv announced its partnership with Affirm in January, wherein the bank technology provider began allowing banks and credit unions to enable pre- post-purchase BNPL loans on their debit cards, allowing consumers to break up most purchases into fixed payments anywhere debit cards are accepted.

Erik Wichita, Fiserv's head of card services, said in a statement that offering BNPL loans allows banks and credit unions to "meet evolving consumer expectations around greater flexibility in how they pay for purchases all the while building a strong relationship with their primary financial institution."

"This partnership gives our clients a practical, scalable way to offer such payment flexibility through their existing debit products — helping them compete effectively, deepen customer and member relationships, and drive top-of-wallet engagement with their products," Wichita said.

What is giving banks pause on offering BNPL to consumers?

Key takeaway: Risk and regulatory worries are holding back the pace of BNPL adoption.

Risk and regulatory concern (22%) was the top reason identified by respondents for not yet offering BNPL at their institution. Other factors holding back institutions included BNPL not being a priority (19%), BNPL not part of the institutional strategy (18%) and low/no demand from customers (12%).

Operating in a highly regulated industry like banking means worries about regulators and risk are not uncommon with newer offerings such as BNPL, especially considering the CFPB's prior attitude towards the lending products. Following numerous layoffs at the bureau, some executives could be encouraged to explore BNPL more. 

In December, attorney generals from Connecticut, North Carolina, California, Colorado, Illinois, Minnesota and Wisconsin jointly penned a letter to major BNPL firms seeking clarity about business practices while expressing concerns that deregulatory efforts in the industry could harm consumers.

"We are concerned that BNPL companies might not be providing their customers with appropriate protections when they return their purchase, never receive what they ordered, or experience other billing errors," wrote the AGs.

More recently, New York Governor Kathy Hochul announced proposed rules that center around the licensing of BNPL lenders and establish protections for consumers using BNPL loans.