Buy Now, Pay Later: Where Have the Months Gone?

Debbie Bartoo

September 21, 2023

Debbie Bartoo

At the beginning of the year, I hypothesized that four issues needed to be addressed for sustained Buy Now, Pay Later success. What happened this year? To what extent did we mature our BNPL market?  Let’s take a look at 2023 progress:

Issue 1: BNPL Education

January recommendation: We need more and better consumer education for BNPL to continue to grow rapidly.

Status: 🟡

The Consumer Financial Protection Bureau (CFPB) continued to develop new educational materials for the industry on BNPL; building on previous efforts. News and media outlets also developed materials to help educate consumers, like this video by the Wall Street Journal titled “Buy Now, Pay Later Apps vs. Credit Cards: The Pros and Cons ,or this report by Consumer Reports. Of course, these are examples. Many other educational activities took place, which is wonderful. Lastly, I don’t want to overlook efforts made by BNPL providers and merchants to educate consumers – many are working to do their part here. 

Next Steps:
Consumer education is never over. More and better consumer education will be needed to ensure consumers continually understand BNPL products and their associated risks. The goal is to help consumers make informed decisions about whether or not to use BNPL, aiding BNPL companies to grow responsibly. What gaps still exist in consumer education? Ideally, consumer education will be delivered across channels and focus on the following topics:

  • What is BNPL?
  • How does BNPL work?
  • What are the benefits and risks of BNPL?
  • How to use BNPL responsibly?
  • Where to get help if you have problems with BNPL?

It is essential to make consumer education accessible to everyone, regardless of income, age, or level of financial literacy.

Issue 2: BNPL Fraud Mitigation

January Recommendation: BNPL risks and related fraud schemes must be better understood, monitored, and managed for BNPL to thrive. 

Status: 🟡

Fraud solution providers have tools in place to aid with fraud mitigations that are similar to mitigation tactics with other payment methods. 

Next Steps:
We will have to do more work in this area.

The BNPL ecosystem will need to continue to implement general fraud mitigation best practices. For example, to help prevent account takeover, BNPL providers can monitor suspicious account activity, such as logins from unusual locations or changes in contact information and they can require users to verify their identity before making a purchase. To prevent synthetic identity fraud, BNPL providers can use machine learning to detect synthetic identities and can require users to provide documentation to verify their identity, such as a driver’s license or passport. 

We will also need to solve for fraud vectors that may be particularly significant with BNPL. For example, BNPL allows authorizations with thin credit pulls and provides funds to consumers with a slim credit history. In many ways, this is wonderful. But it also leaves an opportunity for friendly fraud, which is notably on the rise. BNPL providers (and merchants) should implement fraud screening tools like internal blacklisting to limit friendly fraud or consider fraud solutions that provide guarantees. 

Lastly, we can collaborate to enhance fraud mitigation. Personally, I would love the industry to collect and publicize industry costs specific to BNPL fraud losses and mitigations.  

While no fraud prevention method is perfect, active fraud programs will help.  

Issue 3: BNPL Business Models

January Recommendation: We need to unearth sustainable BNPL business models so BNPL providers can thrive in times of abundance and economic instability. 

Status: 🟡

The 2023 macro environment, while challenging, attracted many consumers to use BNPL solutions. The cost of living and interest rates impacted consumers, with funds not stretching as far as they needed to, and the appeal of BNPL became a viable option for many.

While this environment may have not demanded new BNPL business models, new models (and providers) appeared nonetheless. FIS noted in their GPR 2023 report noted a new class of providers emerging beyond fintechs, where merchants, card networks, and banks entered into this ecosystem to compete. Apple is an example of a new model.  Apple delivered the Apple Pay Later solution that provided a merchant-funded option for a BNPL program.

Next Steps:
There are many more BNPL options today for merchants to consider as they work through the economics of a program and how they share costs with the providers. Merchants will have to be savvy about selecting the right solution(s) for themselves and their customers (and BNPL companies will have to work harder to differentiate themselves).

Moreover, merchants should be thoughtful about go-to-market strategies, as future macroeconomic conditions remain unclear, and we don’t fully understand the impacts of varying economic environments.

Issue 4: BNPL Regulation

January Recommendation: We need regulations to ensure the right balance of innovation, competition, and safety for consumers. 

Status: 🟡

Regulatory progress is inconsistent and country-dependent. This year brought about increased regulatory scrutiny of BNPL products, and, in some countries, the promise of regulation. For example, in May, Australia said it would regulate BNPL as a consumer credit product through updated laws. In this instance, BNPL providers will be required to carry out background credit checks before lending, and they will need to notify customers when credit limits increase. 

A new tracker was introduced by Bird & Bird to monitor BNPL regulation activities.  

Next Steps:
Regulation is still required in countries that lack it. As regulations are adopted, the business model for BNPL will change, with new costs borne by the BNPL providers. These changes may challenge some providers to continue. Some BNPL companies know the extensive changes they will need to undertake when regulation is adopted, others should learn. Ideally, these regulations should support financially healthy consumers.


BNPL did not progress in 2023 as much as I would have liked. Where have the months gone? That aside, I believe BNPL adoption will continue, regulation will come, along with fraudsters, and there will be winners and losers. Ultimately, a product incorporating strong risk management and consumer protections will position itself for success. Let’s hope for a year of ‘green’ status in 2024.

Recent Payment Views

Payments Post #9: Glenbrook’s November Roundup – Fighting Fast Fraud

Payments Post #8: Glenbrook’s October Roundup

At Glenbrook, we’ve been watching rising interest rates and vacillating economic conditions over the course of the year; while economists debate the likelihood of further rate hikes and the odds of a near-term recession, we dig into the real impact of these uncertain...

read more
PSD3: Implications for the U.S.

PSD3: Implications for the U.S.

Much has already been written about the Third Payment Services Directive (PSD3) and its anticipated scope following the release of the draft texts earlier in the year, but, understandably, mostly from a European standpoint. Arguably, PSD3 is likely to be more of an...

read more

Glenbrook Payments Boot CampTM workshop

Register for the next Glenbrook Payments Boot Camp®

An intensive and comprehensive overview of the payments industry.

Train your Team

Customized, private Payments Boot CampsTM workshops tailored to meet your team’s unique needs.

OnDemand Modules

Recorded, one-hour videos covering a broad array of payments concepts.

GlenbrookTM Company Press

Comprehensive books that detail the systems and innovations shaping the payments industry.

Launch, improve & grow your payments business