At a Glance

The Buy Now, Pay Later (BNPL) market keeps expanding. A report by Insider Intelligence is forecasting that by 2027, the overall BNPL payment value in the U.S. will reach $124.8 billion. Credit card providers are paying attention and coming up with their own solutions to compete.

For example, American Express offers the Plan It installment program and Chase has a similar option called My Chase Plan. Credit card issuers are also staying ahead with personalized financial wellness tools based on consumer spending data and enticing reward programs.

The financial market is cutthroat – and that’s good news for consumers. Companies are pushed to continually innovate, enhance their services and elevate their customer experience. The growing popularity of BNPL is only going to encourage more innovation and benefit credit cardholders, too.

To help you wrap your head around the topic, Credello turned to a diverse group of thought leaders for their insights.

Experts featured in this article

Fred Winchar, Founder and Certified HR Professional, MaxCash

Percy Grunwald, Co-Founder, Compare Banks

Thomas Franklin, CEO and Co-Founder, Bitinvestor

John Frigo, E-commerce Manager, Best Price Nutrition

Josh Ladick, President, GSA Focus

Renuka S, Digital Marketing Manager, HEAL Software

Eugene Klimaszewski, President, Mammoth Security

Abid Salahi, Co-Founder and CEO, FinlyWealth

Leverage spending data for loyalty

“Credit card companies will likely emphasize developing financial wellness tools to stay ahead of BNPL providers. Credit card issuers have access to extensive customer spending data, unlike BNPL services, which allows them to offer more nuanced financial advice,” Fred Winchar, Founder and Certified HR Professional at MaxCash, told Credello.

Analyzing spending data can help credit card issuers develop all sorts of helpful offerings, such as budgeting strategies based on a customer’s purchasing habits. Consider a scenario where someone frequently overspends on dining, suggests Winchar:

“The credit card company’s tool could analyze this pattern and suggest a budgeting plan, showing potential savings if dining expenses are reduced by 20%. This personalized advice, based on real spending data, helps the customer manage finances better and encourages loyalty to the credit card brand—a reasonable win-win.”

In other words, data is a competitive advantage for credit card issuers when competing with BNPL – the opportunity to access deeply personalized financial recommendations and tools is compelling for cardholders looking to get a better grip on their finances.

Customize rewards to consumer preferences

Customizing rewards is another way that credit card issuers can leverage personalization to keep consumers loyal. “I believe a key strategy for credit card companies to maintain a competitive edge over BNPL is to innovate their customer loyalty programs. In an era where BNPL options are gaining popularity for their convenience and flexibility, credit card companies need to provide more than just credit; they need to offer value that resonates with the modern consumer,” according to Percy Grunwald, Co-Founder of Compare Banks.

Here’s what Grunwald means by this: Instead of generic reward points, credit card issuers can tailor perks to cardholders’ spending habits – think, exclusive discounts on their favorite brands or access to events and experiences that align with their lifestyle, such as concerts or sporting events. “This customization not only enhances the user experience but also fosters a deeper connection between the consumer and the brand,” adds Grunwald.

BNPL providers have a leg-up on credit cards by offering consumers easy access to zero-interest payment plans. But credit card issuers can keep attracting and retaining customers by shifting from generic perks to personalized incentives.

Simplify and enhance reward programs

When it comes to reward programs, simplicity is key, Thomas Franklin, CEO and Co-Founder or Bitinvestor, shared with Credello: “When credit card companies offer rewards that are easy to understand, they can make their cards more attractive. This is especially true for younger customers who might prefer the simplicity and flexibility of BNPL services. This is a smart way for credit card companies to remain relevant and competitive as the financial world evolves.”

For instance, credit card providers can enhance reward programs by creating better cashback cards that don’t have cardholders scratching their heads about how to redeem their rewards. “They could make rewards change automatically based on where the cardholder spends the most, so the cardholder doesn’t have to do anything,” says Franklin.

Transparent and user-friendly features are crucial – consumers won’t see the appeal of credit card perks if they don’t experience the benefits in concrete ways and without hassle.

Adapt to BNPL’s payment convenience

People like BNPL because of its convenience. Credit card companies can compete by integrating BNPL-like features into their offerings and making it really easy for consumers to pull the trigger on purchases.

“One thing I notice about BNPL is that many people don’t even need the credit, but using BNPL has ‌become like using PayPal to them. They know the login to their Sezzle or Affirm account, and it’s easier just to log in and pay than to pull out a credit card,” John Frigo, E-commerce Manager of Best Price Nutrition, told Credello.

Offering flexible payment options, however, is also paramount for people who do need the credit and want to manage their cash flow more efficiently without paying interest. Flexible payment options like American Express’ Plan It installment program and Chase’s My Chase Plan help credit card providers to compete with BNLP.

Introduce charitable transaction programs

Socially conscious initiatives can be a unique selling point for credit card issuers aiming to compete with BNPL. “Credit card companies can innovate by introducing a “Credit Card Philanthropy” program. With this unique feature, a percentage of each transaction made with the card goes toward supporting charitable causes chosen by the cardholder,” according to Josh Ladick, President of GSA Focus.

Imagine selecting from a list of participating charities and knowing that your everyday spending contributes to making an impact on a cause that matters to you.

As Ladick puts it, this approach is powerful “because it aligns with the growing trend of socially responsible spending and allows cardholders to feel that their financial choices directly benefit causes they care about, setting credit cards apart from BNPL services.”

Not only can tying credit card use to charitable transaction programs help credit card companies have an edge, but it also helps make the world a better place and pleases conscious consumers. It’s a win-win.

Deploy triple-strategy for competitiveness

Renuka S, Digital Marketing Manager, HEAL Software, told Credello that credit card companies can focus on three pivotal strategies for competitiveness: strengthening security, enhancing reward programs, and offering competitive low interest rates. “Enhancing security is crucial; by implementing advanced security measures, credit card companies can ensure a safer transaction environment, which is vital in today’s digital age,” notes Renuka S.

The second strategy is all about reimagining reward programs through the use of data to provide highly personalized perks. Cardholders have different spending habits and lifestyle choices – and their rewards should be different too.

Finally, competing on interest rates is vital. Let’s not forget that BNPL attracts cost-conscious consumers. Credit card issuers need to offer “clear, competitive and low-interest rate options” to attract those consumers and position themselves as a “financially prudent choice for managing purchases and cash flow.”

The synergy of those three strategic pillars can help credit cards differentiate themselves in a noisy marketplace.

Empower users with financial management tools

Empowering users with financial tools builds loyalty. And, once again, personalization matters. Eugene Klimaszewski, President of Mammoth Security, shared with Credello that he foresees credit card companies integrating more personalized financial management tools into their client journey.

“Personalized financial management tools could include features like tailored spending insights, budgeting assistance, and predictive analytics to help users plan purchases and payments. By leveraging advanced data analytics, credit card companies can offer individualized financial advice, alert users to potential savings, and even predict future spending patterns.”

According to Klimaszewski, this approach is empowering because cardholders gain more knowledge and control over their finances: “These tools can help users make more informed decisions, potentially reducing financial stress and increasing satisfaction with their credit card services.” Doing this effectively is an impactful way to stand out against other financial service providers – improve your clients’ lives and they’ll keep sticking around.

Enhance engagement with digital platforms

Digital platforms are key to cardholder engagement – and they can help credit card issuers outperform BNPL providers. People no longer tolerate dated, clunky interfaces. Part of the appeal of BNPL is the ability to finance a purchase in a couple of clicks, so credit card issuers need to make sure that the experience of logging into your client dashboard and leveraging card features is seamless.

“By utilizing smartphone apps or online platforms, companies can interact with users in real-time, offering instant support, insight into spending, and even fun interactive features like the gamification of savings goals,” Abid Salahi, Co-Founder and CEO of FinlyWealth, told Credello. “This aligns with the digital shift, enhancing user experience while also promoting financial literacy and responsible credit usage.”

Bottom line

From providing personalized rewards to empowering cardholders with tools to manage their finances and mimicking some of the benefits of BNPL, credit card companies can adopt several strategies to differentiate themselves from BNPL providers.

They should never get complacent though. Today, credit card providers are competing against BNPL. Tomorrow, they may be facing other challenges. When FinTech startups pop up with creative solutions left and right, legacy credit card companies need to keep adapting to survive – and thrive – in the landscape of financial services.