BNPL, the credit card slayer?

The payment sector has changed profoundly by the rise of the Buy Now, Pay Later options – but can it truly win the race? Or are credit cards, the well-known and established payment method, still here to stay?

It feels like Buy Now, Pay Later (BNPL) is something new that changes the payment market as we know it. But besides the fact that it is actually a pretty well-aged payment option, it is at least disputable, if it will truly outrank the credit card. Still, it does offer some benefits for customers to choose and for companies to offer BNPL options.

According to the report “The Payments Revolution”, conducted by Sifted, BNPL has become the younger, tech-driven sister of ‘instalment payments’. It took the age-old mechanism of sale financing, automated it and made it mainstream. It is predicted that by 2025 the spending in e-commerce in Europe via BNPL will hit almost 300bn euros, which means 30 percent of all predicted e-commerce spending in that year. According to, the market share of BNPL in domestic e-commerce payments rose from 0.4 percent in 2016 to 2.1 percent in 2020. It is especially popular in north-western Europe, but also in Australia and New Zealand. In Germany alone, the market share of BNPL is about 18 percent. The numbers differ whether we are talking about online shopping or paying in a store. But overall, as stressed in a 2019 Deloitte report, BNPL had irreversibly taken some market share from credit cards.

For the customer, BNPL is a very convenient way of paying: Modern day BNPL tools, also known as Point-of-Sale (POS) credit or POS financing, allow consumers to instantly defer payments to  merchants, settling their debt in various instalments, and all of that at its best at zero interest. It also allows people who do not qualify for a credit card, which is common in economically uncertain times, to spread out payments over time. Using BNPL also cuts out the interchange fee that credit card providers earn on transactions.

Compared to credit cards, companies that offer BNPL products rather target companies instead of the end customer. The EHI found out that companies and especially online shops which offer open invoice as one of the BNPL methods, on average performed approximately 46 percent better than those that did not offer this option.

In short, credit cards are not going anywhere and the market needs both. Or, as summarised in the report by Deloitte: “The credit card will remain an important product due to its distinctive ability to combine the supply of credit with a payment device,” the report summarised. Still, BNPL is catering to a widely underserved market. On average, only about 33.7 percent of Europeans over the age of 15 have credit cards. BNPL providers can take this huge gap without taking any market from the credit card industry.

Concluding, for most customers it will not be a choice of either or. Both options do offer significant benefits as well as some drawbacks. BNPL companies need to be aggressive to get even more traction in the market.