Why Banks Are Choosing Card-Linked Installments to Compete with BNPL

The buy now, pay later services market in the United States was valued at USD 170.32 billion in 2025 and is only anticipated to grow. For banks, the question is no longer whether to respond to the BNPL disruption; it’s how to compete with them.

Financial institutions are finding their answer in card-linked installments. Unlike traditional BNPL that originates new loans, card-linked installments leverage existing credit card infrastructure, activating the average $35,474 in unused credit already on US cardholders’ accounts. Banks can offer payment flexibility through proven bank payment solutions while maintaining regulatory compliance, protecting customer relationships, and generating interchange revenue from portfolios they already manage.

Card-linked installments address critical requirements simultaneously: competitive payment flexibility, revenue optimization for existing portfolios, regulatory compliance through established infrastructure, and protection against third-party disintermediation. The question isn’t whether installment payments matter, it’s whether banks will respond with solutions that strengthen their position.

The BNPL disruption banks can no longer ignore

Banks are losing ground at the most critical moment in commerce: the checkout. While financial institutions have spent decades building card portfolios and customer relationships, they’re discovering that those relationships mean nothing when consumers reach the payment screen and see a BNPL option as the only flexible payment available.

What makes this particularly damaging is that banks currently have no presence in this decision moment. When consumers arrive at checkout and see “split into 4 payments” or “pay over time”, their bank cards sit invisibly in the standard payment field with no comparable flexibility messaging. The choice becomes obvious: select the visible, frictionless installment option that BNPL platforms promote, or pay the full amount immediately with a credit card.

The average checkout now presents BNPL as a prominent payment method alongside credit cards, with dedicated buttons and clear value propositions about payment splits. Banks, meanwhile, offer nothing equivalent at checkout. Credit and debit cards process transactions the same way they have for decades, full payment, full amount, no flexibility communicated, while BNPL platforms actively market payment alternatives that appeal to budget-conscious shoppers. 

Even consumers with substantial available credit on bank-issued cards are choosing BNPL options because flexibility is presented and promoted at the decision point. Banks lose the transaction, the interchange fees, the interest revenue opportunity, and, most critically, relevance in the consumer’s purchasing journey. The credit line sitting unused on their card becomes worthless when another platform offers visible payment options that match their immediate needs.

What makes card-linked installments different from traditional BNPL

Card-linked installments give banks what they currently lack: a competitive presence at checkout that transforms how consumers perceive payment with their existing cards. 

Traditional BNPL providers built their businesses by offering this flexibility prominently at the payment decision moment. But their model comes with significant friction; new account creation, credit applications, redirects away from merchant sites, and approval rates that decline 60-70% of shoppers.

Card-linked installments represent a fundamentally different approach. Instead of originating new loans through third-party platforms, they activate the unused credit consumers already have on their bank-issued cards. This distinguishes them not only from traditional BNPL but also from post-purchase installment programs, solutions that activate existing credit but remain invisible during the critical checkout moment when consumers make payment decisions.

What makes card-linked installments different from post-purchase installments

Post-purchase installments give consumers flexibility after the purchase decision, while this approach activates existing credit, it misses out on the competitive space of the checkout.

BNPL wins by influencing the purchase decision at checkout. When a shopper sees “Pay in 4 interest-free payments” prominently displayed alongside the buy button, that messaging drives conversion. But every BNPL transaction requires consumers to originate a new loan, separate applications, credit checks, and additional debt obligations. By the time a consumer considers splitting a purchase after the fact, the competitive moment has passed, and they likely went to a BNPL platform that was visible when it mattered.

Post-purchase installments require consumers to log into banking apps after completing their purchase and manually request payment splits. This creates friction that reduces adoption and eliminates any opportunity to influence the original purchase decision. Card-linked installments work seamlessly at checkout with the cards consumers already carry, presenting payment flexibility at the moment it matters most.

For banks, the strategic distinction comes down to positioning. Post-purchase installments activate dormant credit but remain invisible at checkout. Traditional BNPL offers checkout visibility but requires consumers to take out new loans. Card-linked installments deliver both advantages: they’re visible at the decision moment while leveraging credit consumers already have, so no new debt, no applications, just flexible payment terms using their own approved credit capacity at the point of sale.

Protecting customer relationships through white-label banking payment solutions

The current BNPL model systematically weakens bank relationships. When consumers select a traditional BNPL provider at checkout, they create accounts with competing financial services platforms, provide personal financial information to third parties, and establish transaction histories these platforms use for ongoing marketing. Every BNPL purchase trains consumers that banks can’t provide the payment flexibility they need.

This displacement accelerates because BNPL platforms don’t just process transactions, they actively build direct relationships with consumers at the moment banks are absent.

Card-linked installments through white-label payment solutions reverse this dynamic entirely. The bank’s brand remains central throughout the transaction. Consumers see installment options presented as features of their existing bank relationship, not alternatives requiring new platform accounts. When transactions complete, purchase history appears in banking apps customers already use daily, reinforcing the institution’s role as primary financial partner.

Banking customers consistently report preferring financial services from their primary institutions over third-party fintechs. Card-linked installments align with these preferences by consolidating financial management within existing relationships rather than fragmenting it across multiple platforms.

The advantages of card-linked installment programs for banks 

Card-linked installments don’t just match BNPL’s checkout presence; they deliver measurable performance improvements across metrics bank executives prioritize while addressing the visibility gap that currently allows fintech competitors to dominate payment flexibility.

Reclaiming checkout visibility and conversion 

When consumers reach the payment screen and see BNPL options offering “4 interest-free payments,” bank cards present no comparable messaging. Card-linked installments eliminate this false choice by presenting bank-enabled flexibility directly at checkout. 

Revenue protection and portfolio activation

When consumers split purchases through BNPL providers, interchange fees that would flow to card-issuing banks instead benefit fintech platforms. Card-linked installments preserve this revenue on transactions. Key economic advantages include:

• Interchange preservation: Banks capture fees on the full transaction amount versus losing revenue entirely to BNPL
• Portfolio utilization: Activate the $35,474 average in unused credit sitting dormant on cardholder accounts
• Higher transaction values: Card-linked installments generate 3x higher average order values versus traditional BNPL

Customer relationship protection

Consumers using bank-provided installment features demonstrate 24% higher repeat purchase rates. They consolidate spending onto bank-issued cards rather than fragmenting transactions across BNPL platforms, increasing customer lifetime value while reducing relationship displacement risk.

Moving forward: reclaiming checkout visibility

The strategic imperative for banks is straightforward: they can’t compete with BNPL platforms at checkout if they remain invisible during the payment decision. Card-linked installments address this visibility issue by providing banks with what they currently lack: a presence at the moment consumers choose how to pay.