The Evolution of ‘Buy Now, Pay Later’ (BNPL) Services

A few decades ago, if you couldn’t afford to buy something outright, you had two options: wait and save, or use layaway. Layaway was a patience-based system – you paid for the item in installments before receiving it. It taught discipline, but it also came with the risk of cancellation, restocking fees, or simply losing interest by the time the final payment was made.

Layaway began to fade as credit cards took over, but interestingly, it experienced a brief resurgence after the 2008 financial crisis. Retailers like Walmart brought it back in 2011 as consumers became more debt-conscious and wary of high-interest credit.

Then came credit cards. Suddenly, you could take the item home now and worry about payment later. The convenience was powerful but so was the interest. For many, credit card debt snowballed as minimum payments dragged repayment into years. On the upside, credit cards introduced features like purchase protection and rewards programs, something most layaway or BNPL options still lack.

In the past few years, a new model emerged: Buy Now, Pay Later (BNPL). Offered by companies like Affirm, Klarna, Afterpay, and PayPal, BNPL feels modern, easy, and more flexible than traditional credit. It typically allows consumers to split a purchase into 4 equal payments, often with zero interest – if paid on time. It’s marketed as a smarter alternative to credit cards, especially for younger buyers wary of debt.

But BNPL is not a new idea. It’s the evolution of old financial tools wrapped in a modern, mobile-first package and it comes with its own fine print.

A Quick Timeline of ‘Pay Later’ Models

• Layaway (1930s–1990s, briefly revived post-2008): Pay in installments, receive the product only after the balance is paid in full. No debt incurred, but requires upfront discipline.
• Credit Cards (1950s–): Pay now, receive immediately, pay later with interest. Encouraged consumer spending but introduced long-term debt risks.
• BNPL (2010s–): Split payments over weeks or months, typically no interest if paid on time. Embedded directly at online checkout. Marketed as frictionless, budget-friendly, and transparent.

Each iteration made the experience of spending easier and more immediate. But that ease can also disguise cost.

Even Credit Cards Are Getting In on It

Although BNPL began with fintech startups, its appeal has pushed even traditional credit players to adapt. Most major credit card issuers now offer installment plans for specific purchases branded as “flexible financing” or “plan it later” features. These blur the line between revolving credit and structured payment plans.

Even digital wallets are joining the movement. Apple, for example, launched Apple Pay Later in 2023, a BNPL feature integrated directly into Apple Pay. It lets users split purchases into four payments over six weeks, with 0% interest if paid on time. While Apple Pay itself is simply a payment method (like using a debit or credit card), Apple Pay Later is unmistakably a BNPL product.

This shows how embedded BNPL has become. It’s not just a niche offering, it’s a reshaping of consumer finance norms.

Comparing BNPL to Credit Cards

Feature	BNPL	Credit Cards
Interest	Usually 0% for short-term pay-in-4	15–30% APR, compounding
Fees	Late fees apply	Interest + late fees + compounding
Approval	Often soft credit check	Hard credit check, credit history-based
Integration	Built into online checkout	Requires manual entry
Credit Reporting	Often not reported (unless delinquent)	Builds or hurts credit depending on use
Rewards	Rare or retailer-specific	Common points, miles, or cash back
Risk	Multiple loans across platforms, late fees add up fast	Revolving debt, high interest over time

BNPL can be a great budgeting tool if used responsibly. But unlike credit cards, which consolidate purchases under one account, BNPL lets consumers open multiple “mini loans” across retailers. This makes it easier to lose track of how much you owe.

According to a 2022 survey by LendingTree, nearly 70% of BNPL users admitted they spent more than they would have otherwise, and about 42% had missed a payment. Some reported using one BNPL service to make payments on another, creating a cycle of short-term borrowing that mirrors the credit card traps BNPL is meant to avoid.

Why It Feels So Easy (and That’s the Point)

BNPL is built into the checkout page. There’s no extra form, no separate credit card process. You click “Pay in 4,” and the first installment is charged. For many consumers, especially younger ones without established credit histories, BNPL feels safer than credit cards. No risk of maxing out a card, no monthly statements. Just bite-sized payments.

But that frictionless experience is intentional. The smoother the process, the more likely you are to say yes without weighing whether you should.

This is where the psychology starts to creep in: BNPL is not just a payment plan, it’s a behavioral nudge. We’ll explore this deeper in our upcoming piece on the neuroscience of retail therapy and the dopamine cost of impulsive spending.

Final Thought

BNPL isn’t good or bad, it’s a tool. For some, it offers structure and simplicity. For others, it opens the door to untracked, emotional spending. Like any form of debt, its impact depends on how you use it.

Before you click “Pay Later,” take 30 seconds and ask: Would I buy this if I had to pay full price today? That one question may be more powerful than the payment plan itself.