What if your customers no longer see traditional credit as their first choice? For a growing number of people, especially the younger generation, that’s already a reality. They actively choose the simplicity and transparency of buy now, pay later options, thus creating a clear opening for businesses to acquire new users and build deeper customer relationships.
The catch is that buy now, pay later (BNPL) is far more than a payment method. It’s a full-fledged financial product where success depends on smart underwriting, powerful compliance, and a flawless user journey. Getting the technology right is everything.
This article breaks down how does BNPL work, and what it really takes to win with BNPL. We’ll look under the hood at the data science that powers it and lay out the two primary paths for implementation: building your own platform from scratch or integrating an existing solution.
The Market Shift: Why BNPL Technology Is Gaining Traction Across Segments
That small Pay Later button at checkout is more than a feature. It represents a shift in how people borrow and buy, which is moving well beyond retail and creating a new strategic territory. Once a simple tool for selling more products online, buy now, pay later is now a sophisticated financial service model, and its momentum is accelerating for compelling reasons.
If anyone still wonders what does BNPL stand for, first things first, it means a clear business opportunity. There’s a growing appetite for straightforward and transparent financing. People, especially young, are increasingly wary of revolving credit card debt. Instead, they prefer the clarity of fixed installment payments.
More than half of Americans currently use BNPL and another 15% are expected to try it in 2025, according to the survey. For Gen Z, it’s often preferable to use credit cards for major purchases. The global market for buy now, pay later services is valued at $343.5 billion in 2025 and is expected to jump by nearly 70% by 2030.
Of course, this rapid growth hasn’t gone unnoticed. As competition intensifies, so does regulatory scrutiny. But this is good news, as regulations in the US, UK, and EU are bringing structure and legitimacy to the market. For businesses, this creates a more stable and predictable environment for investment.
The core drivers behind this acceleration are clear:
- Consumer demand for payment flexibility
Today’s consumers are moving away from the high-interest rates and long-term debt associated with traditional credit. A BNPL option provides a fixed repayment schedule, so the user knows exactly what they will pay. This makes buy now, pay later feel more like a responsible budgeting tool.
- Shift from transactional UX to embedded finance
BNPL technology is one of the main components of the shift toward embedded finance, where the financing offer seamlessly integrates into the purchase flow. The underwriting and approval process happens in the background, removing the “I’m applying for a loan” feeling and improving the customer experience.
- Rising competition in fintech & challenger banks
In the crowded digital banking space, offering BNPL is quickly becoming table stakes. As leading fintechs and challenger banks integrate these services, customer expectations have shifted. Users now see flexible payment options not as a perk but as a standard feature of any modern financial platform. The competitive landscape is a classic sign of the struggles facing fintech businesses in the era of commoditization.
For a fintech company, not offering buy now, pay later options means risking user churn. It has become a key tool for both acquiring new users looking for modern payment solutions and retaining existing ones. We will explore specific buy now, pay later examples later in this article.
- Regulatory momentum is catching up (in a good way)
The initial ‘Wild West’ era of BNPL is ending. Regulators in the US, UK, and Europe are establishing clear rules of the road, including requirements for more transparent terms and stronger affordability checks to protect consumers.
Regulatory clarity reduces ambiguity and builds consumer trust, making the buy now, pay later market a much more stable environment for strategic investment.
- Micro-lending turns into a market expansion strategy
A BNPL solution can often say ‘yes’ when traditional credit models would say ‘no’. By using alternative data for underwriting, these services can assess the risk of individuals with thin credit files. So, as we see, buy now, pay later technology is a powerful micro-lending engine that opens a path to serve underbanked populations and younger consumers. Here, off-card BNPL services can capture a whole new market segment.
- AI and data blend allows for smarter risk management
The magic behind instant approvals is a sophisticated blend of data and artificial intelligence. Modern BNPL platforms don’t just rely on a simple credit score. Their artificial intelligence (AI) models analyze hundreds of data points in real time: from a customer’s purchase history and repayment behavior to device information and other behavioral signals. This application is a perfect example of the broader impact of AI in fintech.
The Benefits of Buy Now, Pay Later Option for Fintechs
Integrating a buy now, pay later option is more than a defensive move to keep up with the market. It’s a strategic choice that delivers measurable advantages to your business that impact everything from top-line revenue to long-term customer loyalty.
Let’s talk about the benefits of buy now, pay later in greater detail.
- Unlocks new revenue streams
A BNPL business model opens new income channels, primarily through merchant fees per transaction. Depending on regulations, customer interest in longer-term plans can also generate revenue. This diversifies the income of your buy now, pay later business. This fee is typically collected automatically through an integrated payment gateway at the point of sale.
- Increases user acquisition and conversion
Sticker shock is one of the biggest reasons for cart abandonment. BNPL removes that barrier by breaking down a large total into small, manageable payments. This makes it far more likely for a customer to complete a purchase, especially a larger one. Businesses on Stripe have seen up to a 14% increase in revenue on sessions where buy now, pay later was an option. This is especially true for high-ticket BNPL purchases like electronics or furniture. This converts more existing users and attracts new customers seeking this payment flexibility.
- Boosts retention through embedded utility
BNPL is naturally sticky. When a customer makes their first purchase, they enter your ecosystem, and the repayment schedule keeps them engaged over weeks or months, building a habit. The quality of that digital engagement, happening over weeks or months, often hinges on the mobile app development services behind the platform.
Unlike a one-off transaction, buy now, pay later provides a utility customers rely on, making them more likely to return for future purchases.
- Enhances cross-selling opportunities
A customer who trusts you with credit is a warm lead for other financial products. The data from your buy now, pay later technology is valuable. Once they are actively using your payment solution, introducing other investment tools is a natural next step.
- Strengthens merchant partnerships
If you offer a white-label BNPL solution, you stop being just another vendor and become a growth partner. You’re providing merchants with a tool that directly increases their conversion rates and average order values, making your service indispensable. You can provide data-backed intelligence on customer behavior and solidify a mutually beneficial relationship.
- Improves market positioning
Offering a data-driven BNPL technology service sends a clear signal: you understand the needs of today’s consumers. It’s especially effective for attracting a younger, tech-savvy demographic that actively seeks out brands that align with their financial habits and preferences.
Turning fintech product ideas into reality hinges on choosing the right partner. Wondering who leads the market?
Read our article on the best fintech development companies.
How Does BNPL Work with Data in Its Core
From the outside, buy now, pay later looks like a simple button on a checkout page but that simplicity is deceptive. Behind the scenes, BNPL is a high-speed, data-intensive lending product that works because it acts on massive volumes of information in milliseconds.
Here’s a look under the hood at how data powers every critical function of a successful BNPL platform.
Real-Time Credit Decisioning
While traditional lending takes days, BNPL payments take seconds. This speed is possible because automated engines instantly analyze data points far beyond a credit report, including purchase behavior, cart value, device ID, location, and transaction history.
Powerful AI models then calculate a user’s likelihood of repayment on the spot, opening up credit access for people who might be invisible to slower systems.
Dynamic Risk Scoring & Loan Structuring
No two customers or transactions are the same. A smart BNPL system knows this and uses custom scoring algorithms to structure loans dynamically instead of offering a flat credit limit.
Based on its real-time analysis, the platform instantly decides the appropriate loan limit, the number of installments, and whether to offer an interest-free period. A new customer buying a small-ticket item might get different terms than a long-time user with a perfect repayment history who is making a larger purchase.
Serhii Leleko
ML & AI Engineer at SPD Technology
“The core engineering challenge in BNPL is building a system that can trust a new user instantly. You can’t do that with a traditional credit score alone. You need a data model that understands context, weighing a user’s behavior against the product, merchant, and other real-time signals to make smart decisions on the spot.”
Behavior-Based Personalization
The data’s job isn’t done after the initial approval in most BNPL programs. Past transactions, shopping habits, repayment history, and even how a user interacts with your app all feed into a continuous personalization loop. Insights help the platform make smarter decisions over time. Personalization can identify which users are good candidates for higher credit limits, who needs a gentle payment reminder, and which accounts might require tighter restrictions to prevent defaults.
Fraud Detection & Identity Verification
The speed and accessibility of BNPL also make it a target for fraud. AI models act as a security team, trained to spot anomalies by integrating identity data like KYC inputs with behavioral indicators, such as typing speed or session time. It allows the system to flag deviations instantly, stopping fraudulent transactions and protecting your business. The methods used are often more advanced than traditional credit card fraud detection because they must happen in real time.
Merchant Intelligence & Portfolio Optimization
For businesses offering a white-label BNPL solution, transaction data is a goldmine for your merchant partners. Analytics can show how BNPL lifts their conversion rates, increases average order value, and what their repayment patterns look like. These are insights professional data analytics services can unlock from raw data.
At a higher level, this data gives you a portfolio-wide view of risk that helps identify which industries, user groups, or locations are most profitable or carry the highest risk.
Feedback Loop for Continuous Model Improvement
A BNPL platform should get smarter with every transaction. Each data point is fed back into the system, be it a successful purchase, a declined payment, an early installment, or a late fee. The constant feedback loop continuously refines the credit scoring and fraud detection models. The result is a system that self-optimizes over time and improves approval rates for good customers while steadily reducing default rates and losses.
In short, data is the foundation of a modern BNPL service. Without real-time analytics, automation, and adaptive learning models, the entire system becomes unsustainable at scale.
In our track record, there are many fintech solutions. For one of our clients, we built a reliable and scalable custom SMB funding platform. Our software solution became their growth engine, helping the company provide $350 million in financing to thousands of businesses.
Buy Now, Pay Later Examples
The biggest names in BNPL didn’t get there by following a single buy now, pay later definition. Each of them represents a distinct strategic bet on how to win the market. Looking at how they operate reveals the different ways a BNPL service can be built to create value.
Apple Pay Later
Apple’s strategy is all about ecosystem control. By funding Apple Pay Later from its own balance sheet, it maintains complete ownership of the user experience. The service is deeply integrated with the Apple Wallet, the Apple Card, and Apple Savings. The integration makes it intuitive for users to understand how to use buy now, pay later within their existing digital wallet.
Shopzero and BNPL Partners
Shopzero illustrates a partnership-centric model. Instead of becoming a direct lender, this Australian e-commerce player integrates with seven different major BNPL providers, including Afterpay, Klarna, and Zip. By integrating multiple partners, Shopzero has built one of the most flexible e-payment systems for e-commerce in Australia.
Such an approach gives customers maximum choice at checkout while Shopzero maintains full operational control over its payment process.
Affirm
Affirm is a pure-play technology and data science company that offers a clear answer to the question of how does BNPL work with sophisticated tech. Its core strength lies in its proprietary AI-powered underwriting models that assess risk in real-time using alternative data, not just traditional credit scores. This allows Affirm to confidently handle larger-ticket items and offer customized loan terms, often with simple interest.
Affirm’s success is built on its advanced use of data to manage risk. Want to learn more about using intelligent fraud management?
Discover the details in our article on AI in fraud.
Two BNPL Technology Implementation Paths: Build or Integrate
Once you’ve decided to offer BNPL, the next critical decision is how to implement it. The choice between integrating a third-party service and building your own platform depends entirely on your strategic goals, resources, and long-term vision. Each path comes with its own set of fintech application development challenges.
Here is a direct comparison of the two strategies.
Option 1: Building a Buy Now, Pay Later Product from Scratch
This is the path for companies that want to own their financial product, top to bottom. It’s the right choice for fintechs building, for example, a proprietary lending service, marketplaces that need to control the full user journey, or banks aiming to offer white-label BNPL for business customers.
Building your own platform involves significant technical work:
- Developing the backend credit decisioning logic, a loan management system, and repayment workflows.
- Integrating KYC, fraud detection software, and payment gateway APIs.
- Setting up the data infrastructure for credit scoring, risk analytics, and regulatory reporting.
- Creating the front-end components for checkout, user dashboards, and notifications.
The upside is complete control over the user experience, data, and product roadmap. You can innovate freely, creating proprietary scoring models. This platform becomes a core business asset that can be scaled or resold as a B2B service.
Serhii Leleko
ML & AI Engineer at SPD Technology
“Integrating a third-party solution means renting their risk model; it’s fast, but your innovation is tied to their roadmap. Building your own platform means creating a data asset. Every customer interaction enriches your models over time, allowing for hyper-personalization and risk management that no off-the-shelf solution can match.”
Option 2: Integrating a Third-Party BNPL Service
This approach is about speed and efficiency. It’s a smart move for fintech apps or neobanks wanting to add BNPL as a feature without a massive upfront investment or for retailers looking to quickly increase conversion rates. It’s also a great way to test market demand.
Integration is a much lighter technical lift compared to building a BNPL solution from scratch:
- Connecting to a third-party BNPL provider’s API or embedding their SDK.
- Applying light branding and UX customizations to match your interface.
- Syncing essential data like customer records and repayment statuses.
- Configuring transaction rules in the provider’s merchant dashboard.
You get to market fast with a lower initial development cost. The provider handles the heavy lifting of credit scoring, fraud management, and most payment processing compliance regulations. It’s an effective way to offer a valuable feature to your customers without diverting your engineering team from its core mission.
Despite different levels of technical complexity and required upfront costs, b paths require a strategic development partner to ensure the solution is secure, scalable, and correctly connected to your existing systems.
Consider SPD Technology for BNPL Platforms Development and Integration
Whether you choose to build a proprietary system or integrate a third-party solution, success depends on a technology partner who gets the nuances of user experience, data science, and regulatory compliance. SPD Technology supports both tracks: from full-scale BNPL product engineering to smooth third-party integration and data pipeline development.
We bring a specific set of skills to the table that are critical for modern fintech products.
- Proven fintech product engineering track record: For years, our teams have delivered secure, scalable, and reliable fintech platforms. We understand the critical importance of ensuring data security in fintech applications from day one.
- Expertise in BNPL-enabling technologies: We work with the technologies that power modern buy now, pay later services. Our expertise covers AI/ML, big data analytics, cloud-native architecture, and secure API development for a solid technical foundation.
- AI/ML-driven decisioning systems: We have direct experience building the intelligent core of a BNPL solution. Our data science teams can develop custom AI/ML models for real-time risk scoring, fraud detection, and credit decisioning, making your platform truly competitive.
- Smooth integration capabilities: If integrating is the right path for you, we make sure it’s done right. We handle API connections, data synchronization, and UI embedding to ensure the third-party service works perfectly within your existing ecosystem.
- Built-in regulatory readiness: We don’t treat compliance as an afterthought. Our development process includes building for regulatory requirements like the standards for KYC in banking, AML, and data privacy from day one to help you navigate the evolving legal rules in the BNPL space.
Business-centric delivery: Our focus is on delivering business results, not just code. It doesn’t matter whether you want to increase conversion, enter new markets, or create new revenue streams, we work with you to understand your goals and ensure the technology we build directly supports them.
Beyond the Plan: Your Next Step
The demand for buy now, pay later is undeniable. It’s a clear path for fintech solutions to win new customers, increase conversion, and build deeper relationships. But as we’ve seen, success with BNPL comes from mastering the technology that powers it.
We’re talking about real-time decisioning, AI-driven risk models, and secure data pipelines. Whether you choose to build your solution from the ground up or integrate a third-party service, the technical execution must be flawless.
Ready to turn this market shift into a true competitive advantage? Our teams specialize in engineering data-first BNPL solutions that work at scale. Contact us to discuss your project.
FAQs
- How is BNPL different from traditional financing or layaway?
BNPL gives you the item immediately, unlike layaway. Compared to credit cards, it offers fixed, interest-free installments, making it a simpler and more transparent financing option without revolving debt.
- Which BNPL services are the most popular in the US and Europe?
In the US, services like Affirm, Afterpay, and Klarna are very popular. In Europe, Klarna is a dominant force alongside other regional players. Apple Pay Later is also gaining significant traction in markets where it’s available.
- Is buy now, pay later safe to use?
Yes, reputable buy now, pay later (BNPL) technology providers use strong encryption and fraud detection to protect your data. Safety also depends on responsible use. Since it’s a loan, ensure you can afford the repayments to avoid late fees and protect your credit.