The news: Financial institutions (FIs) are still largely skeptical about the value buy now, pay later (BNPL) will bring their institutions, often citing regulatory uncertainty, according to American Banker. And that skepticism grows as institutions get smaller, per the same study: 48% of national bankers, 36% of regional bankers, 23% of community bankers, and 7% of credit union professionals think BNPL is good for banks as a whole.

The data: EMARKETER’s “US Consumer Habits Survey” sheds light on what this skepticism could mean for FIs’ bottom line. Among BNPL users, 65% turn to providers other than their primary FI for these services, and 11.5% use a combination of their primary and secondary providers.

This means that a significant portion of FIs are losing customers at checkout.

The problem: According to EMARKETER’s “Ecommerce Survey,” between 10% and 16% of US consumers’ digital purchases rely on BNPL, with Gen Zers using it the most. As the market grows and more young consumers in particular rely on BNPL, FIs that already have a knowledge gap among young consumers (i.e.,credit unions) risk widening that gap. At the same time, FIs that offer BNPL will continue to strengthen those relationships.

The benefits: Credit unions are increasingly adopting BNPL and seeing strong early engagement. Some programs are driving even higher usage than fintech alternatives and retaining over 80% of users into year two, per CreditUnions. Those credit unions have benefited from offering pre-approved, personalized installment options with less friction, improving the member experience and boosting product usage (e.g., increased debit card activity). 

While much BNPL activity still occurs outside of traditional institutions, early adopters are recapturing transaction volumes, deepening relationships, and gaining visibility into member spending and repayment behavior. However, those that lean into their skepticism could risk engagement and a deeper understanding of their customers’ spending habits.

Recommendations for financial providers: BNPL will continue to experience steady growth through 2030, according to EMARKETER’s forecast. To benefit from this growth, financial providers must move beyond skepticism and define a clear BNPL strategy—whether building in-house capabilities or partnering with fintechs to accelerate time to market. Just as importantly, BNPL needs to be embedded directly into existing digital channels—from mobile apps to card offerings—so it’s available at the moment of purchase. Otherwise, consumers will continue defaulting to third-party providers.

Still, FIs have an opportunity to differentiate through transparency and trust. By offering clear terms and positioning BNPL as a responsible alternative, they can address regulatory concerns while appealing to younger consumers still forming financial habits. Paired with stronger education and awareness efforts—particularly among Gen Z—this can help close the perception gap and keep customers in the FI ecosystem. Without action, FIs risk losing both transaction volume and long-term relationships at checkout.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Non-clients can click here to get a demo of our full platform and coverage.