The rapid rise of BNPL and alternative credit models is transforming how consumers pay — and raising new questions for merchants, regulators and lenders.

“Buy now, pay later” (BNPL) has become one of the most talked-about trends in payments and consumer finance. At its core, BNPL allows consumers to split purchases into instalments at the point of sale, often interest-free for a defined period, thereby lowering the barrier to purchase and offering a new financing route outside of traditional credit cards.

According to U.S. data, the number of BNPL loans grew more than tenfold from 16.8 million in 2019 to 180 million in 2021; dollar volume increased from about US$2 billion to US$24.2 billion in that period.

Drivers of BNPL growth
Several factors drive BNPL’s rise:

• Consumer demand for flexible payment options and desire to avoid credit-card debt.

• Merchant desire to increase conversion and average-order-value by offering instalment payments at checkout.

• Fintech innovation enabling quick underwriting, frictionless onboarding and integration at point-of-sale.

• Low interest-rate environment (in many markets) that makes consumer financing cheaper.
  
  Merchant and payment processing impact
  For merchants, BNPL introduces both opportunity and complexity: On one hand, offering BNPL can boost sales and reduce cart abandonment; on the other, merchants must integrate the service, deal with fee structures, manage payment settlement timing, and understand the risk of consumer default. A study highlighted the largely unregulated nature of BNPL is catching regulatory attention. From a payment-processing standpoint, BNPL impacts flow of funds, settlement timing and merchant acquirer/processor relationships. Payment processors and fintechs have to support the split-payment infrastructure, monitor risk, and integrate with broader payment rails.
  
  Regulatory & consumer-risk considerations
  While BNPL continues to grow, regulators are increasing scrutiny. For example in the U.S., the Consumer Financial Protection Bureau (CFPB) and other agencies are examining consumer-protection issues, transparency of fees, and potential for over-indebtedness. Consumers may treat BNPL as benign alternative to credit cards, but default risk, late fees and lack of credit-reporting may create systemic concerns.

• Emerging and alternative use-cases
  BNPL is increasingly being applied beyond retail: travel, hospitality, healthcare and even B2B payments are exploring instalment-based payment models. Redbridge In addition, alternative financing models (subscription-based, pay-later-with-wallet etc) are emerging in conjunction with BNPL.

Future outlook
Key trends we expect:

• Continued growth of BNPL globally, though growth rates may moderate as saturation and regulation increase.

• Integration of BNPL into wider payment platforms and ecosystems (wallets, banks, fintechs).

• Increased regulatory frameworks ensuring transparency, consumer protection and risk-controls.

• Finance providers and merchants will compete to embed BNPL (and similar) options directly at checkout, eliminating friction. BNPL and alternative financing have become central to payment processing innovation. They redefine how merchants offer payment options and how consumers manage cash-flow, but they also bring new risk and regulatory dimensions.

Closing Thoughts:
For merchants and payment platforms, the question is no longer if but how to integrate BNPL and alternative financing in a way that boosts conversion, manages risk and aligns with regulatory demands. For consumers, these options offer flexibility — but may come with hidden costs and obligations. The payment-processing landscape is shifting: credit is no longer separate from payment; it is built into the transaction.
Reference sites:

1. “Buy Now, Pay Later Growth Raises Concerns | Morgan Stanley”, Morgan Stanley Insights, https://www.morganstanley.com/insights/articles/buy-now-pay-later-trends-2025

2. “The Rise of Buy Now, Pay Later Plans | Richmond Fed”, Federal Reserve Bank of Richmond, https://www.richmondfed.org/publications/research/econ_focus/2024/q4_feature1

3. “The Hidden Credit Risks Of ‘Buy Now, Pay Later’”, Forbes, https://www.forbes.com/councils/forbesfinancecouncil/2025/02/04/buy-now-pay-later-hidden-credit-risks-in-the-digital-payment-revolution/

4. “The Rise and Risk of Buy Now, Pay Later: A Fintech Revolution in Consumer Credit”, Auditing Accounting, https://auditingaccounting.com/the-rise-and-risk-of-buy-now-pay-later-a-fintech-revolution-in-consumer-credit

5. “Buy Now, Pay Later in an Era of Increased Scrutiny and Economic Headwinds”, Ballard Spahr LLP Insights, https://www.ballardspahr.com/Insights/Alerts-and-Articles/2024/02/BNPL-in-an-Era-of-Increased-Scrutiny-and-Economic-Headwinds

Serge Boudreaux – AI Hardware Technologies
Montreal, Quebec

Peter Jonathan Wilcheck – Co-Editor
Miami, Florida