On the eve of the COVID-19 pandemic, large banks were jolted by the sudden rise of a new credit alternative. That 2019, buy now, pay later option from specialized providers like Klarna, Affirm and AfterPay took off with cash-strapped consumers. BNPL sought to compete with the multi-trillion-dollar credit card industry, where banks issuing plastic fuel the workhorse of American credit. Wall Street’s dominance of consumer credit since the early days of metal charge plates faced a revenue-draining, potentially existential threat.
“Banks were blind-sided by the unexpectedly rapid rise of BNPL,” said Dean Sheaffer, a former banking industry credit card executive who is now the chief operating officer of Roam, a financial technology firm focused on payments for the travel industry. The pay later alternative“gained traction much more quickly than many expected.” Now, he said, financial institutions “are worried enough to make substantial investments in people, systems, compliance, marketing and much more to respond to a clear and present threat.”
Banks’ strategy was to act like BNPL. Specifically, allow millions of holders of traditional credit cards to use them to pay for goods or services in a series of fixed monthly installments at no interest, instead of revolving an interest-bearing balance or paying in full each month.
So far, the plan is working.
A forthcoming PYMNTS Intelligence report (Jan. 2) shows that when it comes to taking care of the bill for certain purchases, consumers are turning to fixed installments on general-purpose credit cards faster than to BNPL. Over three months including November, just over 3 in 10 U.S. adult consumers (32%) used card installments for at least one type of purchase. That compares to a much lower 23% during the three months through last April. BNPL usage actually slipped during those time frames, to 14% from 15%. Purchases for travel or vacations, concert tickets or other events, or home services like kitchen remodeling are particularly likely to garner card installment usage.
There’s additional recent evidence that card installments are fighting back — and winning. This Black Friday, 31% of shoppers opted to pay via card installments, about the same share as last year, PYMNTS Intelligence data shows. But 29% of online shoppers used that method, up from 26% a year ago. Consumers living paycheck to paycheck and struggling to pay their monthly bills flocked to the method. Nearly 6 in 10 (58%) used card installments for their online and in-store purchases, up from 49% last year. BNPL use barely rose, to just under 12% of all purchases.
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The Blind Side
Estimated by PYMNTS Intelligence earlier this year to total $175 billion, the buy now, pay later market in the United States is a drop in the bucket compared to the credit card industry, where balances owed topped $1.2 trillion in the third quarter of 2025, Federal Reserve data show. Still, it’s…
