In recent years, Buy Now, Pay Later (BNPL) has transitioned from being a novelty to becoming a structural phenomenon within the ecosystem of payments and consumer financing. However, its rapid adoption has not always been accompanied by a deep understanding of its real implications, especially from the perspective of risk, consumer behavior, and financial product design.
For this reason, I would like to invite Carlos, an experienced credit risk professional, to share a technical—yet grounded—perspective on one of the most common mistakes observed in the market: treating BNPL as if it were simply a traditional consumer loan.
Far from being a semantic debate, this confusion has concrete consequences on business decisions, risk models, technological architecture, and ultimately, the sustainability of products. The following article seeks to open that conversation, challenge ingrained assumptions, and provide evidence to understand why BNPL requires consideration with a different logic from its inception.
The mistake of treating BNPL as a traditional loan
By: Carlos, Head of Risk & Data Science – Plug&Lend Inc. - January 23, 2026
Having immersed myself in the credit world, I have frequently heard colleagues comment that Buy Now, Pay Later (BNPL) is simply a traditional consumer loan that is easier to obtain. However, as I have learned about different use cases, I have realized that this perception can be a dangerous illusion, capable of leading to poorly thought-out business decisions.
BNPL is not a traditional consumer loan disguised as fintech. There are multiple reasons why both products should not be considered equivalent. However, at Plug&Lend, we prefer to explain BNPL as financing associated with a specific transaction, under a completely different structure from traditional credit. In this model, the capital is directly linked to a product or service and never passes through the customer, ensuring 100% utilization of the capital.
We have witnessed that when money is deferred with BNPL, the customer's mindset changes, and therefore, the risk also changes. This occurs because BNPL can create an inflated perception of available funds, leading users to be 22.2% more likely to make discretionary purchases (non-essential products), as they are guided by simple budget signals that do not reflect their future debt commitments [1].
The deferral of payment alters the perception of spending by mitigating the immediate psychological discomfort associated with paying money, a phenomenon we have all felt: the pain of paying. By delaying the impact of spending, BNPL reduces the clarity of payment and separates the benefit of the product from its actual cost. As a result, consumers tend to spend, on average, 4.39% more when using BNPL compared to traditional cards [1]. This notion makes the payment almost invisible to the consumer, becoming merely another option at the time of payment, which positions BNPL closer to a payment model than to traditional consumer credit. Thus, we can begin to conceive the idea that in BNPL:
Where t is the number of payments that usually tends to up to 6 installments.
For BNPL, the zero-cost structure for the user is primarily marketed as a "payment facilitation" that allows the total cost to be divided into equal installments, often without interest (0% APR). This enables BNPL to position itself as a cash management tool rather than a loan with explicit financial costs, becoming a tool for everyday use, allowing more than 50% of a controlled sample to prefer paying with BNPL rather than cash [2].
Eventually, the question we must ask ourselves is whether BNPL can replace traditional loans. Currently, there is not enough evidence to suggest that such a replacement is possible. However, there is evidence that both can coexist and complement each other. In fact, 44% of customers (in a controlled sample) plan to use fixed installment plans (BNPL) simultaneously with other types of credit [2]. That is, the customer does not necessarily abandon traditional credit but rather accumulates multiple types of debt. Furthermore, BNPL addresses needs that traditional loans do not meet, such as financial inclusion, allowing both to coexist serving different purposes [3].
Both products, traditional consumer credit and BNPL, require different development strategies and architectures. In the case of BNPL, this involves having decision engines designed to operate in real-time, capable of integrating multiple data sources and dynamically adapting to the context of each transaction. The incorporation of artificial intelligence models, combined with flexible business rules, allows for frictionless risk assessment at the point of payment, keeping the outcome aligned with the defined risk appetite.
Furthermore, the use of alternative data, along with dynamic assessment strategies, becomes a key piece for improving decision accuracy, optimizing operating costs, and accelerating the scaling of the model. This approach not only impacts in the short term—improving approval rates and user experience—but also enables a sustainable evolution of the business in the medium and long term.
At Plug&Lend, we believe that the world changes quickly, and therefore we must change even faster.
[1] Buy Now, Spend More, Pay Later: Behavioural Mechanisms of Buy Now Pay Later Products Anu Jose, Jane Kelly, Michael King & Yvonne McCarthy Vol. 2025, No. 15
[2] BNPL Becomes a Lifestyle Tool as 53% Use It for Experiences. By PYMNTS. January 21, 2026.
[3] The Next Wave of Buy Now, Pay Later: BNPL 2.0. 2023 Publicis Sapient Corporation. GOV.UK - Regulation of Buy-Now Pay-Later: consultation, Publicis Sapient Analysis.
Comments