The Rise and Evolution of Buy Now, Pay Later in Loyalty

Just as Buy Now, Pay Later (BNPL) options have become a familiar sight on all kinds of ecommerce platforms in the past few years, they’ve become more commonplace within loyalty programs as well.  

This reason why is no great mystery: using BNPL to spread the cost of large purchases over smaller, interest-free installments is a natural fit for an economic landscape where people are increasingly budget-conscious. BNPL provides consumers with the flexibility to make desired purchases without straining their finances in the short term.  

This is at least partially why, according to Juniper Research, the total value of BNPL transactions in the US is expected to rise from $80.8 billion to $124.8 billion by 2028. It’s clear that American consumers have an appetite for BNPL. But should financial services brands be eager to integrate BNPL options into their owned travel loyalty platforms?    

The short answer is yes. BNPL presents a real opportunity for financial services enterprises to increase conversion rates within their travel loyalty frameworks and tap into a broader customer base. By offering BNPL options, particularly for high-ticket items like cruises and airfare, banks and card issuers can make these experiences more accessible to budget-conscious customers and loyalty program members, making dream vacations a more attainable reality. This broader reach and increased affordability translate to a significant potential for increased travel sales. 

Additionally, younger generations, accustomed to digital finance, find BNPL's budgeting control and ability to manage smaller purchases without accruing debt highly appealing. The ease and speed of BNPL transactions at checkout also create a seamless user experience, and increased marketing and brand awareness by BNPL providers further drives adoption.  

Finally, the development of regulations around BNPL offers users greater confidence and security when using these services. These elements all paint a clear picture of why BNPL is experiencing such significant growth, and why it is a good fit for many travel loyalty programs.  

Where did BNPL gain traction, where did it slow down, and where is this evolving ecosystem now relative to other financial services and loyalty programs? 

BNPL’s Strategic Evolution: Moving Beyond the Whirlwind

Fueled by convenience and budgeting benefits, BNPL took off in the mid-2010s, especially among Millennials and Gen Z, who preferred alternatives to traditional financing. Fintech giants like Klarna, Affirm, and Afterpay were quick to partner with retailers, which made BNPL a popular way to get flexible payments on electronics, appliances, and trendy clothes. Traditional banks entered the BNPL market with their own solutions,  (like JPMorgan Chase’s My Chase Plan, American Express Plan It and Citibank’s Citi Flex Pay.   

Consumers proved receptive, and the number of banks that strategically integrate BNPL is increasing (36% of credit card issuers now offer BNPL options, up from 26% in 2023), according to our latest credit card analysis, State of Loyalty: 2024 Credit Card Rewards Report. 

BNPL’s impact extends beyond just financial institutions and retailers. In travel, BNPL providers like Affirm partner with booking websites to make flights more attainable. Vacation rentals on Airbnb or Vrbo can also be financed with BNPL options from Klarna or Afterpay.   
This aligns with broader consumer expectations – 73% of US consumers surveyed for our recent report say they want more fintech tools like BNPL when booking travel with loyalty programs.  This data confirms its staying power in the travel rewards space. But it also highlights the need – and opportunity - for financial institutions to offer BNPL options within their own travel booking platforms.  

According to a Bankrate study, third-party BNPL providers are far more widely utilized than their bank-native counterparts. More US consumers reported using PayPal in 4/Pay Later (16%), Affirm (12%), Afterpay (12%) and Klarna (11%) than Plan It (6%), Citi Flex Pay (3%) or My Chase Plan (4%). 
If a traveler inclined to use BNPL has the choice of booking travel through an OTA that offers Affirm, or their bank’s travel loyalty platform that does not provide any BNPL option at all, that will likely be a missed opportunity.  

That missed opportunity might represent a significant foregone revenue cost, as consumers who purchase with BNPL spend 70% more per travel transaction. It is clearly in financial institutions’ interest to provide the payment options these consumers prefer. 

So, what’s next for BNPL? 

The Future of BNPL Lies in Loyalty 

The future of BNPL isn’t just a convenient payment method; it’s a strategic tool to elevate loyalty programs. BNPL promotes long-term customer engagement throughout the repayment period, encouraging repeat business. Additionally, valuable customer data from BNPL transactions allows for personalized loyalty programs with targeted promotions and rewards based on spending habits. This flexibility also attracts Millennials and Gen Z, key demographics for future growth. In fact, a joint PYMNTS and i2c report found that 30% of millennials and 29% of Generation Z used or anticipated using BNPL to pay for their summer travel last year, compared to just 5% of baby boomers and seniors. That percentage seems poised to increase this year.  

Finally, BNPL offers a streamlined checkout experience, boosting customer satisfaction – but only when implemented correctly. Finding a technology partner that can implement a branded or third-party BNPL at the optimal point in the checkout process is essential for creating a seamless experience that boosts conversions and drives revenue.   

As more travel loyalty programs adopt BNPL, those that don’t risk member attrition. In essence, BNPL helps loyalty programs build stronger relationships, drive repeat business, and stand out in a competitive market.  

Partnering with loyalty technology experts can unlock BNPL’s full potential for financial institutions, enabling them to create seamless, customized programs that meet the flexible payment needs of their members and cardholders. This paves the way for win-win scenarios for both businesses and consumers. Banks and card issuers can gain stronger relationships and potentially more sales, while consumers can earn rewards, manage their finances responsibly, and obtain affordable financing. The key is implementing BNPL seamlessly, utilizing the member data and interactions it generates effectively, and rewarding responsible BNPL use among loyalty members.  

Embracing BNPL in these ways will allow banks’ travel loyalty programs to reach the next level of performance – driving spending and engagement while delivering value to members.   

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To learn more about our work with travel and financial services brands and their loyalty programs, contact us here. 

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