Banks Enter the BNPL Game With Debit-Based Installments

Paying over time, traditionally a hallmark of short-term installment loans, is becoming an option where goods are paid for using money on hand and over several installments.

Some banks are now offering customers the option to have their debit purchases become buy now, pay later (BNPL) installments — spread out over as many as four separate and equal payments.

In this way, traditional financial institutions are competing with companies like Affirm and Klarna. Budgeting is still top-of-mind for consumers, even as interest rates start to back off multi-decade highs.

The PYMNTS Intelligence report “Navigating New Norms: The Use of Card-Linked Installment Plans in Online and In-Store Sales” found that there’s still a wide gulf here. Only about 6% of acquirers, enabling both debit and credit options, offer installment options.

Familiarity With Debit and a Readiness to Use It

Consumers are familiar with installment payments, representing an opportunity for banks willing to move more firmly into pay-over-time options. The PYMNTS Intelligence report “Divided, Not Conquered: Acquirer and Merchant Confusion Clouds Split-Payments Landscape” found that 60% of consumers used installment plans during the year before being surveyed.

There are also indications that debit BNPL offerings would gain ground with bank customers. The PYMNTS Intelligence report “Debit Cards in Digital Wallets Gaining Ground Across Sectors” found that consumers paying with digital wallets used stored debit cards in 55% of grocery transactions, as well as 52% of retail transactions, 62% of restaurant transactions and 46% of travel transactions.

J.P. Morgan Chase offers its Chase Pay in 4 option, where most Chase debit card purchases between $50 and $400 are eligible to be split into four equal transactions over eight weeks. The first payment is due two weeks after the users’ initial opt-in. Separately, Suffolk Credit Union debuted its own BNPL product focused on debit transactions.

The enablers of debit BNPL have also been making strides and announcements in the past couple of months in terms of technical know-how and infrastructure.

Galileo Financial Technologies launched an expansion of its BNPL offering in March for FinTechs and banks to extend post-purchase installment payment options via their existing debit or credit cards. The company said the offering also works with all merchants that accept debit and credit cards.

Coming into 2024, Equipifi announced a white-label BNPL option for debit card issuers. The Pay-in-4 option allows consumers to convert transactions to installment plans at no interest to be paid back in four equal payments every two weeks.

The competitive lines are blurring a bit though. Affirm has its Affirm Card in place, operating as a debit card that allows consumers to pay in full for purchases or request to pay for purchases over time via the Affirm app. Consumers can split eligible purchases into payment plans before the transaction or within 24 hours afterward.