BNPL vs. credit cards: Why consumers prefer to buy now and pay later

The first recognizable and modern universal credit card saw the light of day in the late 1950s. Credit cards have since then seen substantial growth. Still, hand in hand with digitalization evolvement and a roaring e-commerce sector, consumers are demanding versatile and smooth payment options, paving the way for Buy Now Pay Later (BNPL).

Discover the difference between BNPL and credit cards, why consumer preference has changed, and how an omnichannel strategy can boost your business.


The difference between BNPL and credit cards

The plastic rectangular-shaped card containing a series of numbers, also known as a credit card, transformed life as we knew it when it first launched. Although the concept of credit dates back several thousands of years ago, it was the bank-issued credit card that greatly impacted how consumers opt to pay for their purchases.

Pros and cons of credit cards

With a credit card, users have the possibility to make purchases up to a pre-set limit while being able to enjoy several perks. Consumers can, for example, take advantage of potential rewards programs, such as cashback rewards that can be applied toward future purchases or used as statement credits against existing balances. Other benefits include insurance coverage and protection.

In turn, cardholders are charged an annual fee for obtaining the card. Credit cards typically carry hefty interest rates as well, which can quickly add up if balances aren’t paid in full each month. Potential hidden fees covered up by cashback rewards or sign-up bonuses may also apply when using a credit card. This lack of transparency consequently causes complications for consumers wanting to gain control over their personal finances.

BNPL in contrast to credit cards

BNPL, on the other hand, has become synonymous with fast instalment loans and lets you immediately receive a product while deferring payments for weeks or months at a time, e.g., pay in 3 or pay in 4. The repayment schedule may differ depending on the retailer’s or bank’s offering. However, there are no hidden fees and typically low or no interest rates for using BNPL plans – if payments are made on time. This makes BNPL services attractive to consumers looking to finance large purchases without accruing interest charges.

Unlike credit cards, BNPL does not provide profitable rewards programs or protection of any kind. However, one of the significant benefits of BNPL is its simplicity. With credit cards, users must fill out an application and wait for approval before being able to make a purchase. With BNPL services, however, users simply need to set up an account to start shopping – no need to wait for approval or worry about spending limits. The process is smooth, transparent, and flexible.

Accumulating debt may still be a risk for either payment method if not handled responsibly.


BNPL vs. credit cards and consumer preference

The credit card has seen vast growth since its launch, mainly due to the prementioned perks. BNPL is, nevertheless, most recognizable as a recent trend among online shoppers, whereas millennials and Gen Z represent the majority of users.


As of recently, BNPL is just not appealing to the younger generation. Even more mature age groups see the benefits of the payment method. While those aged 18-24 may be using BNPL to keep up with fashion trends, the age group 35-44 favors BNPL due to its cost-effective schemes. With rising inflation and interest rates, BNPL continues to surge, whereas the majority (38%) use BNPL services primarily to split purchases into more manageable payments.

Credit cards have already been outrun by BNPL, whereas nearly 60% of users prefer to buy now and pay later rather than swiping plastic. Another analysis from Gartner showcases that the usage of credit cards will continue to decline, while embedded payments are forecast to grow to $141 billion by 2025.

The analysis argues that the vast growth of embedded payments is pushing credit card use down the ladder. Integrating payment capabilities in apps, “click and collect”-features, and BNPL services are all examples of embedded payments taking the lead. Other factors, such as environmental concerns, are also primary reasons why consumers, especially younger ones, choose embedded payments as a more sustainable option to credit cards.


An omnichannel experience appeals to a larger crowd

In the digital age, convenience and ease of access are paramount. According to the Gartner analysis, banks will not be able to maintain and attract customers unless they can offer a premium experience in their app.

Even though consumers are moving away from credit cards and making room for BNPL and other embedded payments, credit cards remain one of the most accepted payment methods. An omnichannel banking strategy has thus become essential for a bank or any financial institution wanting to create tailored services that meet each customer’s individual preferences.


It's no longer about solely fulfilling needs but about exceeding customer expectations.

Bahareh Zand, CPO at Sileon

Besides allowing end-consumers to seamlessly switch between financial products such as credit cards and BNPL, the option to Pay Later (PL) is an equally important matter. Pay Later refers to post-purchase instalments, for example, using BNPL retroactively as consumers convert an already executed card transaction into a split payments option.

For customers, omnichannel banking makes managing their finances more accessible and convenient than ever before. Nevertheless, enriching banking experiences with personalized payment options and complementing traditional channels with digitization is not only favorable to the customers. For banks, it creates a centralized platform that allows them to track customer behavior across all channels. This results in more insights into customer preferences and needs.


Adding BNPL or PL to your financial system

There are two main ways for a bank, lender, or fintech to include BNPL or PL in their offering. These include building or buying a BNPL platform.

Building a BNPL product in-house means possessing complete control over the product lifecycle. However, if not obtaining sufficient resources or skills, developing a secure yet market, brand, and payment-agnostic product can be very time-consuming.

Considering the time spent on development, maintenance, and the severe costs of tech and skills, buying a BNPL product to fit your organization’s infrastructure is often more cost-efficient in the long run.

Sileon’s BNPL platform plugs into your financial system seamlessly and is ready to be up and running in a matter of weeks. The advanced technology behind the product caters to an evolving demand, making it possible for you to expand your offering to different markets and countries with varying products of credit. This includes online and in-store purchases or post-purchase (or both).

The information in this article is for informational purposes and general distribution only. Sileon assumes no responsibility or liability for any errors or omissions in the content of the article. The content in this article may change without notice.