The press and pundits are sounding the alarm that credit cards are under threat from Buy Now Pay Later (BNPL) programs. Although it makes for great headlines, it is far from likely.
Yes, both are payment options. And, yes, both give consumers a choice. But the use cases for BNPL and credit cards aren’t the same for all individuals, or even for all purchases. When financial institutions assume that there is a one-size-fits-all solution, they often meet the needs of only a small group of customers, alienating a significant portion of the rest. This is where today’s ever-expanding roster of fintechs have found their opportunity with BNPL, capitalizing on consumer demand for timely and flexible payment options at the point of sale. They are also looking to expand into debit and payment – and a full suite of payment products is a greater threat than just BNPL.
In other words, financial institutions shouldn’t worry that BNPL will cannibalize their credit card business. Rather, they should be concerned that these new competitors will provide a more complete payment ecosystem that will threaten their relationship with customers.