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A striking paradox has emerged in the U.S. Buy Now, Pay Later (BNPL) landscape, according to recent research from J.D. Power. While financial technology (fintech) companies still dominate in usage, traditional banks are significantly outperforming them in customer satisfaction. This presents a unique challenge and opportunity for banks looking to expand their footprint in this rapidly growing payment sector.
The Satisfaction-Usage Dichotomy
J.D. Power’s study reveals a clear split:
- Banks lead in satisfaction: Bank-offered BNPL programs achieved an impressive overall satisfaction rating of 704 points out of 1,000. This marks a substantial 59-point increase from the previous study.
- Fintechs lag in satisfaction: In contrast, fintech BNPL providers scored 603 points, a 17-point decrease year over year, with several major players experiencing drops.
- Fintechs dominate in usage: Despite lower satisfaction, fintechs maintain an overwhelming lead in user adoption. A staggering 97% of survey respondents reported using fintech BNPL, a slight increase from the prior study.
- Banks struggle with usage: Bank BNPL usage remains at a mere 3% among the nearly 4,000 consumers surveyed, dropping a percentage point.
This data highlights a critical question for traditional financial institutions (FIs): How can banks and credit unions leverage their superior customer satisfaction and existing relationships to capture more of the burgeoning BNPL market from their fintech rivals?
BNPL: The Fastest-Growing Payment Method
The appeal of BNPL is undeniable, especially among younger demographics.
- Rapid Adoption: The J.D. Power 2026 U.S. Buy Now Pay Later Satisfaction Study found that 37% of consumers made a BNPL purchase within 90 days of being surveyed, a 5-percentage-point increase over the previous year.
- “This is the fastest-growing payment method that we track,” says Sean Gelles, senior director of banking and payments at J.D. Power, noting that 50% of younger consumers are utilizing BNPL.
- Top Performers: Among providers, Chase has moved into the top spot for satisfaction, surpassing Plan It by American Express, with Citi Flex Pay ranking third.
The Pre-Checkout Decision Trend
A significant finding is that nearly half (48%) of bank card customers decide to use a BNPL plan *before* reaching the checkout, with this figure rising to 59% for consumers under 40. This emphasizes the need for banks to offer seamless, early-stage BNPL options. “Pay in four” plans continue to be the most popular format across both bank and fintech users. Gelles advises, “If you don’t have a buy now, pay later product, you need to launch one. You need to meet your customers where they are.”
Opposing Strategies: Pre-Purchase vs. Post-Purchase
Banks and fintechs largely approach BNPL from different angles:
- Bank Approach: Most bank BNPL lending is post-purchase, allowing customers to convert existing credit or debit card charges into installment plans via an app or website.
- Fintech Approach: Fintechs dominate pre-purchase BNPL, where the option is presented and chosen directly at checkout.
However, this dynamic is shifting. Fintechs are increasingly investing in debit card programs that facilitate post-purchase plans, viewing them as a “strategic wedge” to attract deposits and deepen customer relationships. Klarna, for example, is aggressively marketing its debit card alternative. Affirm is also working to integrate its BNPL plans into existing bank debit card programs through partnerships with vendors like FIS and Fiserv.
BNPL as a Fintech’s Entry Point to Banking
Bryce Deeney, CEO and co-founder of Equipifi (which helps banks set up debit-card-based BNPL), explains that fintechs initially gained users through pre-purchase checkout options. Now, with millions of users, they are focused on increasing “wallet share” and engagement by issuing debit cards and aiming to become full-fledged banks.
This strategy is evident in their pursuit of bank charters. Affirm applied for a Nevada industrial bank charter, and PayPal has sought one in Utah. Block (owner of Afterpay) already operates an industrial bank. This trend mirrors SoFi Technologies, which began as a fintech and acquired a bank charter to expand its offerings. The current environment of higher credit costs has only amplified this urgency among fintechs to diversify and solidify their financial foundations.
Defensive or Offensive: Banks’ BNPL Strategy
For many incumbent banks, entering the BNPL space has been largely a defensive move, aimed at building a “moat” around their existing customers to prevent fintechs from poaching them. This “blocking and tackling maneuver,” as Gelles describes it, has led banks to significantly improve their customer experience, as reflected in their higher satisfaction scores.
Chase, in particular, stands out, increasing its satisfaction score by 31 points. It has improved clarity on perks and eligible charges, offering post-purchase BNPL options for both credit and debit cards. This focus on transparency is crucial, as research firm Fullstory notes that 79% of consumers abandon BNPL checkouts due to a lack of clarity regarding total costs or payment schedules.
Taking the Offensive: Learning from Fintechs
The nearly 50/50 split between pre- and post-checkout BNPL decisions presents a clear opportunity for banks to go on the offensive. Gelles suggests banks should make BNPL options available and easy to choose during the checkout process itself.
U.S. Bank has embraced this with its new Split World Mastercard, launched in November. This card automatically splits charges over $100 into a three-month payment plan at the point of sale, with longer terms available for a fee. While it requires a credit card application, its design aims to appeal to Gen Z by offering immediate BNPL choice.
Deeney believes that for traditional FIs, BNPL isn’t just about customer acquisition, but about deepening relationships with existing customers. This aligns with consumers’ desire to consolidate their financial activities with fewer providers.
Understanding the BNPL Customer and Benefits
There’s a misconception that BNPL cannibalizes lucrative credit card usage. Deeney argues otherwise: “For a consumer who uses a credit card, they like to use a credit card. For a consumer who does not use a credit card, they either use debit or debit plus buy now, pay later.”
He highlights that BNPL underwriting is done on a per-transaction basis, providing a more current assessment of a customer’s creditworthiness compared to potentially outdated credit card underwriting. Furthermore, debit-based BNPL can bolster an institution’s funding and generate interchange income from the initial swipe.
Ultimately, adopting pre-purchase BNPL and BNPL in general is vital for appealing to younger generations. “Generation BNPL” often prefers this payment method and may consolidate their banking business with providers that offer it. As Deeney points out, “Your typical Klarna or Affirm user does not have an American Express Platinum Card in their wallet. In fact, the vast majority don’t have credit cards at all.” Banks and credit unions must adapt to serve these distinct customer segments to thrive in the evolving payments landscape.
Source: thefinancialbrand.com