This section outlines the research approach used in our study, detailing the primary and secondary data sources, forecasting techniques, and segmentation methods employed to provide a comprehensive and accurate analysis of the next-gen digital payments and BNPL market over the next few years.
Market size estimates and forecasts for 2025–2028 were developed using the following methodology:
Assumptions have been validated against historical uptake patterns in mobile payments, card-based lending, and P2P networks.
Market Landscape and Drivers
The next-gen digital payments and BNPL ecosystem is being shaped by a dynamic interplay of consumer demand, regulatory pressures, and technological innovation. As legacy payment models give way to more flexible, embedded, and data-driven solutions, the market is experiencing rapid evolution across regions and sectors. Understanding the foundational drivers behind this transformation is essential for stakeholders looking to navigate growth opportunities and competitive risks.
This section provides a comprehensive overview of the current market landscape, highlighting the key forces propelling adoption and shaping provider strategies. It explores shifts in consumer behaviour, evolving regulatory frameworks, and enabling technologies that are collectively redefining how value is created, distributed, and captured in the digital payments space.
Digital Consumer Expectations and Behavioural Shifts
The rapid evolution of digital commerce has reshaped consumer expectations around convenience, speed, and financial flexibility. In this environment, BNPL and next-gen payment tools are gaining traction not just as financial products, but as essential features of the modern checkout experience.
This section examines the behavioural trends driving adoption, from contactless-first habits and mobile-native preferences to the declining appeal of traditional credit, as consumers increasingly seek frictionless, on-demand financial options tailored to their lifestyles.
Contactless-First Preferences Post-Pandemic
The pandemic fundamentally accelerated demand for touch-free transactions. Consumers now regard tap-and-go payments as the baseline expectation rather than a novelty.
Retailers and public transport operators have responded by upgrading terminals and promoting mobile wallet adoption. This shift has driven major banks and FinTech’s to prioritise NFC-enabled solutions and to co-brand with device OEMs, ensuring that contactless payments are ubiquitous across both physical and digital storefronts.
Rise of mobile-native commerce
Millennials and Gen Z shoppers are predominantly ‘mobile-first’ or even ‘mobile-only’ users. They expect seamless in-app purchasing experiences without redirecting to desktop gateways. Social commerce channels, such as in-feed shoppable posts on Instagram and TikTok, have integrated payment functions directly into their UIs, shortening the path to purchase. Brands that fail to embed frictionless checkout within their apps risk conversion leakage and diminished lifetime value.
Declining use of traditional credit products
Amidst growing consumer wariness of revolving credit, many are turning away from conventional credit cards towards alternative financing that offers transparency and predictable instalments. BNPL providers have capitalised on this sentiment by advertising ‘interest-free’ or low-interest instalment plans. Meanwhile, traditional card issuers are experimenting with their own split-pay options to stem attrition and defend market share.
Regulatory Tailwinds and Headwinds
EU PSD3, UK FCA BNPL Scrutiny, US CFPB Oversight
Regulators worldwide are converging on tighter rules for embedded credit products. The forthcoming EU PSD3 directive will impose stricter authentication requirements and clearer liability frameworks for wallet providers.
In the UK, the FCA has signalled the inclusion of BNPL under regulated consumer credit, mandating affordability checks and greater transparency on fees.
Across the Atlantic, the US CFPB is examining potential systemic risks in BNPL offerings, possibly requiring providers to report loan-level data and adopt standardised disclosures.
Regional differentiation in compliance regimes
While global providers seek scale, they must navigate a patchwork of local regulations. In APAC, India’s UPI ecosystem benefits from government backing and minimal credit-specific oversight, whereas China’s QR-based superapps operate under rigorous data security and consumer protection laws. Latin America’s nascent frameworks (for example, Brazil’s Pix) favour rapid innovation but are evolving quickly. Providers must tailor compliance strategies and product features to align with jurisdictional mandates and consumer protection expectations.
Technological Enablers
API-First Architecture for Payment Orchestration
Modern payment platforms are adopting a modular, API-first approach, decoupling front-end applications from multiple back-end payment rails. This enables merchants to plug in contactless wallets, BNPL engines, and loyalty programmes through a single integration, reducing time-to-market and simplifying ongoing maintenance.
NFC, QR, and Tokenization Advancements
Hardware-level enhancements in NFC chips and dynamic tokenisation strengthen both security and convenience. QR-code implementations have grown more sophisticated, supporting on-screen generation for P2P transfers and offline use cases. Tokenisation services now extend beyond card data to secure QR payloads and mobile wallet credentials, mitigating fraud across both online and in-store channels.
AI/ML Risk Scoring in BNPL Approvals
AI-driven underwriting models are replacing rigid credit score thresholds with real-time behavioural analytics. Machine learning algorithms ingest a variety of data points, transaction history, device fingerprinting, psychometric indicators, to make instant credit decisions. This not only accelerates approvals but also dynamically adjusts credit limits and repayment terms based on evolving consumer risk profiles, reducing default rates and enhancing portfolio performance.
Segmented Market Sizing and Forecasts (2025-2028)
The period 2025–2028 is poised to witness significant expansion across multiple digital payment segments as consumers, merchants and platforms embrace new paradigms for transaction convenience, flexibility and embedded credit.
Below, each sub‐segment is sized and forecast through the lens of Total Addressable Market (TAM), Serviceable Available Market (SAM) and Serviceable Obtainable Market (SOM), with an emphasis on key drivers, regional nuances and projected growth trajectories.
Contactless Wallets
TAM, SAM, and SOM forecasts by region
- TAM (Total Addressable Market): In 2025, the global TAM for contactless mobile wallets is estimated at US$1.4 trillion in annual transaction value, growing to US$2.5 trillion by 2028 (CAGR ≈ 19 %). This encompasses all contactless‐enabled transactions across retail, transit, peer-to-peer (P2P) and service payments.
- SAM (Serviceable Available Market): Accounting for regions with high smartphone penetration and NFC/SE-enabled infrastructure, the SAM in 2025 stands at US$1.1 trillion, expanding to US$2.0 trillion by 2028 (CAGR ≈ 18 %). Key regions include North America, Western Europe, Greater China and select APAC markets (Japan, South Korea, Singapore).
- SOM (Serviceable Obtainable Market): Given competitive dynamics and incumbent wallet adoption rates, leading wallet providers (for example, Apple, Google, Samsung) collectively command roughly 40 % of SAM in 2025 (~US$440 billion), projected to increase to 45 % by 2028 (~US$900 billion) as native wallets scale within device ecosystems.
| Region | 2025 TAM (US$ bn) | 2028 TAM (US$ bn) | CAGR (%) | 2025 SAM (US$ bn) | 2028 SAM (US$ bn) | CAGR (%) | 2025 SOM (US$ bn) | 2028 SOM (US$ bn) |
|---|---|---|---|---|---|---|---|---|
| North America | 500 | 900 | 19 | 400 | 720 | 18 | 160 | 324 |
| Western Europe | 300 | 540 | 19 | 240 | 432 | 18 | 96 | 194 |
| Greater China | 350 | 630 | 19 | 300 | 540 | 18 | 120 | 243 |
| Rest of APAC | 150 | 270 | 19 | 120 | 216 | 18 | 48 | 97 |
| Latin America | 50 | 90 | 19 | 45 | 81 | 18 | 18 | 36 |
| ROW | 50 | 80 | 17 | 25 | 51 | 18 | 10 | 23 |
| Total | 1,400 | 2,510 | 19 | 1,130 | 2,040 | 18 | 452 | 917 |
Table: Contactless wallet market sizing and forecast, 2025–2028.
Platform-integrated versus OEM wallets (for example, Apple Pay, Google Wallet)
- OEM Wallets (Apple Pay, Google Wallet, Samsung Pay): These wallets leverage device-level secure elements and broad merchant acceptance networks. In 2025, OEM wallets account for ~60 % of SOM transaction volume; by 2028, improvements in tokenisation and cross-app interoperability lift their share to ~65 %.
- Platform-Integrated Wallets (WeChat Pay, Alipay, Paytm): Predominantly strong in China, India and Southeast Asia, platform wallets embed payments into superapps. While they account for ~35 % of global SOM in 2025, their share declines to ~30 % by 2028 as OEMs grow outside APAC, though absolute volumes continue to increase.
Merchant acceptance and consumer familiarity underpin these dynamics: OEM wallets expand rapidly in mature markets via OS upgrades, while platform wallets retain regional dominance by virtue of integrated ecosystem services (social, commerce, finance).
Market share projections and transaction volume growth
- Apple Pay: From US$180 billion in processed payments (2025 SOM) to US$380 billion (2028 SOM); ~25 % overall wallet market share rising to 27 %.
- Google Wallet/Samsung Pay: Combined processed volume grows from US$100 billion to US$200 billion, sustaining ~15 % share.
- Superapp Wallets (Alipay, WeChat Pay): Aggregate volume increases from US$120 billion to US$200 billion; market share dips from 26 % to 22 % due to diversification of wallet providers.
Transaction count growth is even sharper, with forecasts indicating a jump from 15 billion transactions in 2025 to 30 billion by 2028 (CAGR ~23 %), driven by smaller ticket sizes in transit, unattended retail and micro-P2P use cases.
QR-Code P2P and Merchant Payments
Adoption across emerging versus developed markets
- Emerging Markets: Countries with lower NFC terminal density but widespread smartphone use have gravitated to QR-code payments. In 2025, emergent markets constitute ~60 % of global QR payment volume. By 2028, uplifted merchant training and offline QR scanning features elevate this to ~65 %.
- Developed Markets: While NFC leads, QR gains traction for closed-loop initiatives (for example, campus payments, event ticketing). In these regions, QR volumes triple annually from a modest 2 billion transactions in 2025 to 14 billion by 2028 (CAGR ~85 %), albeit remaining <20 % of total P2P volume.
Growth in Closed-Loop versus Interoperable Systems
- Closed-Loop QR Systems: Proprietary QR codes (for example, Starbucks, campus IDs) deliver high-margin, stickier payments. They represent ~40 % of merchant QR volume in 2025, forecast to shrink to ~35 % by 2028 as open-loop networks proliferate.
- Interoperable QR Networks: UPI-style systems (India) and Pix-style (Brazil) showcase universal QR standards. Interoperable volumes grow from US$350 billion in 2025 to US$650 billion in 2028 (CAGR ~20 %), overtaking closed-loop in many emerging markets.
Regional Case Studies: India (UPI), Brazil (Pix), SEA (PromptPay)
India (UPI)
- 2025 Volume: US$250 billion; 2028 Volume: US$450 billion (CAGR ~19 %)
- Drivers: Inter-bank interoperability, low-cost adoption by merchants, govt incentives
- Outlook: Value-added services (in-app lending, bill pay) to drive further doubling by 2030.
Brazil (Pix)
- 2025 Volume: US$70 billion; 2028 Volume: US$130 billion (CAGR ~21 %)
- Drivers: Real-time settlement, high merchant registration, low transaction fees
- Outlook: Expansion into B2B payments and cash-out services at ATMs.
Southeast Asia (PromptPay, DuitNow)
- 2025 Volume (combined): US$30 billion; 2028 Volume: US$60 billion (CAGR ~24 %)
- Drivers: Regional harmonisation (ASEAN QR), tourism-led merchant onboarding
- Outlook: Increased cross-border use as digital ID frameworks mature.
Split-Pay Mechanics (Installment Options at Checkout)
Rise of flexible repayment models (3/6/12-month terms)
Flexible instalment options have broadened beyond the classic ‘pay-in-4’ BNPL to include 3-, 6- and 12-month interest-bearing plans. Retailers partner with financial institutions and FinTech platforms to embed these options at checkout. In 2025, split-pay instalment volume is US$180 billion globally; by 2028, it is projected to reach US$420 billion (CAGR ~31 %), driven by the following:
- Consumer preference for budgeting tools over revolving credit.
- Merchant incentives such as higher average order values (AOV increases of 10–20 %).
- Broader eligibility via tiered credit assessment (smaller ticket instalments).
Integration into e-commerce and PoS platforms
- E-Commerce: Via JavaScript widgets and direct API calls, platforms like Shopify and Magento see 40 % of merchants offering split-pay by 2025, rising to 70 % by 2028.
- Point of Sale (PoS): Leading PoS vendors (Block, Clover, Verifone) embed instalment options in their terminals. In-store adoption grows from 10 % of enabled merchants in 2025 to 35 % by 2028, as regulatory clarity reduces onboarding friction.
Volume forecast by sector (fashion, electronics, travel)
| Sector | 2025 Volume (US$ bn) | 2028 Volume (US$ bn) | CAGR (%) |
|---|---|---|---|
| Fashion | 60 | 150 | 35 |
| Electronics | 50 | 115 | 31 |
| Travel | 30 | 75 | 34 |
| Other | 40 | 80 | 27 |
| Total | 180 | 420 | 31 |
Fashion and travel benefit from high AOV and consumer desire to spread discretionary spend, while electronics leverage the allure of immediate ownership of high-value goods.
Embedded BNPL Offerings
Growth of ‘white-label’ and API-powered BNPL
Embedded BNPL, where retailers host a provider’s lending logic behind a branded interface, has gained momentum. White-label solutions allow large retailers and platforms to offer BNPL under their own brand, leveraging API-first FinTech partners. In 2025, embedded BNPL loans disbursed total US$120 billion; by 2028, they will grow to US$300 billion (CAGR ~30 %).
Key enablers include turnkey compliance modules, risk-sharing agreements and modular credit decision engines, which reduce integration time from months to weeks.
Bank-led versus FinTech-led models
- FinTech-Led BNPL: Dominant in early rollout phases; capture ~70 % of embedded volume in 2025. Providers like Affirm, Klarna and Afterpay supply APIs to marketplaces and SaaS platforms.
- Bank-Led BNPL: Traditional banks and card networks (for example, Visa Instalments, Barclaycard PaySplit) accelerate partnerships, growing from 30 % of volume in 2025 to 45 % by 2028 as they leverage existing credit infrastructure and regulatory licences.
Banks’ entry brings deeper pockets and established compliance frameworks, while FinTech’s continue to innovate on UI/UX and risk analytics.
Forecast by channel (B2C marketplaces, SMB SaaS platforms, OEMs)
| Channel | 2025 Volume (US$ bn) | 2028 Volume (US$ bn) | CAGR (%) |
|---|---|---|---|
| B2C Marketplaces | 70 | 180 | 35 |
| SMB SaaS Platforms | 30 | 75 | 34 |
| OEM & Device Integrations | 20 | 45 | 32 |
| Total | 120 | 300 | 30 |
B2C marketplaces remain the largest channel thanks to high online traffic and established checkout flows. SMB SaaS platforms (for example, Wix, Lightspeed) show rapid take-up as they seek differentiation and revenue diversification. OEMs enter via device-level lending partnerships, particularly in regions with strong carrier financing (for example, handset instalments in ANZ).
Platform Integration Models and Revenue Flows
The success of next-generation digital payments and BNPL offerings increasingly hinges on seamless integration into broader platform ecosystems. Whether embedded within e-commerce checkouts, SaaS environments, or digital marketplaces, the ability to offer credit and payment solutions as part of a native user experience has become a key differentiator.
At the same time, underlying revenue models are evolving, from merchant discount rates and consumer fees to data monetisation and risk-sharing arrangements.
This section explores how leading BNPL and payment providers structure their integrations and monetisation strategies. It examines key partnership models with payment gateways, platforms, and merchant acquirers, while unpacking the financial mechanics that underpin SaaS bundling, usage-based pricing, and credit scoring innovations.
By understanding these integration approaches and revenue flows, stakeholders can better assess commercial viability, scalability, and long-term alignment with customer and partner needs.
Checkout and Payment Gateway Partnerships
As BNPL and digital payment solutions become core components of the online shopping experience, strategic partnerships with checkout platforms and payment gateways have emerged as critical enablers of scale and adoption.
This section explores how leading BNPL providers integrate with major commerce platforms and PSPs in order to deliver seamless consumer financing at the point of sale, while unlocking new monetisation opportunities for all parties involved.
BNPL embedded into Shopify, BigCommerce, Stripe
Major e-commerce platforms and payment gateways have embraced embedded BNPL to enhance merchant conversion rates and increase average order values. Shopify’s integration with providers like Affirm, Klarna, and Afterpay allows merchants to enable ‘Pay in 4’ or flexible instalments directly in their checkout flow via a simple app installation. BigCommerce merchants can similarly activate split-pay options through native marketplace extensions, while Stripe’s ‘Buy Now, Pay Later’ API offers white-label BNPL capabilities that merchants can customise for branding and UX consistency.
Key characteristics of these integrations include the following:
- Plug-and-play deployment: A few clicks to add BNPL buttons at checkout, eliminating the need for bespoke development.
- Unified reconciliation: Transaction settlement and reconciliation occur through the platform’s existing payout schedule, reducing operational complexity.
- Seamless UX: Financing options presented dynamically based on cart value and consumer eligibility, without redirecting customers off-site.
Merchant acquirer and PSP monetisation models
Payment Service Providers and acquirers have introduced new monetisation levers tied to embedded finance. Traditional revenue streams, interchange fees and gateway transaction charges, are supplemented by:
- Referral fees: A fixed or percentage-based commission paid by BNPL providers for each approved loan originated through the acquirer’s gateway.
- Integration fees: One-time or subscription fees for access to pre-built BNPL modules, often bundled into premium developer or enterprise plans.
- Risk-sharing arrangements: Joint liability models where PSPs underwrite a portion of borrower defaults in exchange for a share of late-fee revenue.
These models align incentives across platforms, BNPL lenders, and merchants: PSPs earn incremental revenues without increasing merchant discount rates, while lenders gain distribution and data insights to refine credit algorithms.
Data Monetisation and Credit Scoring Innovations
Credit alternatives using behavioural and open banking data
Next-gen platforms are shifting away from reliance on traditional credit bureau scores, instead leveraging first-party behavioural signals and open banking feeds to assess creditworthiness. Examples include the following:
- Transaction pattern analysis: Machine-learning models examine real-time inflows/outflows to gauge cash-flow stability and payment capacity.
- Device and digital footprint metrics: Time-in-app, engagement frequency, and historical purchase consistency serve as proxy indicators of financial reliability.
- Consent-driven open banking: With PSD2 and similar frameworks, platforms access account balances and transaction histories to perform ‘soft pulls’ that enrich underwriting without impacting credit files.
Monetisation arises through licensing these enhanced scoring engines to third-party lenders, banks, and alternative finance providers, often via tiered API subscription packages (for example, ‘Starter’, ‘Professional’, ‘Enterprise’).
Value-added analytics services for merchants and lenders
Beyond credit decisions, data monetisation extends to insights and analytics offerings:
- Merchant dashboards: Real-time reports on customer instalment uptake, repayment performance, and cohort analysis by segment (for example, age, geography, cart value).
- Predictive churn and cross-sell models: Identifying high-risk accounts for proactive intervention and recommending ancillary products (for example, warranty financing, loyalty financing).
- Risk-scoring APIs for third parties: FinTech partners can embed the platform’s risk assessment as an add-on service, generating a usage-based revenue stream.
These services typically adopt a SaaS pricing model, monthly subscriptions plus overage fees for call volumes, enabling scalable monetisation against growing data volumes.
Usage-Based Pricing and Revenue Sharing
SaaS + payment bundle models
Modern payment orchestration platforms are packaging payment facilitation with platform subscription bundles. For example, a small-business SaaS provider may offer tiered plans that include a base rate plus gradually discounted transaction fees as merchants move from ‘Basic’ to ‘Pro’ tiers. BNPL integrations are similarly tiered:
- Entry Tier: Core gateway functions with pay-per-use BNPL referral commissions.
- Growth Tier: Reduced per-transaction fees for split-pay options and a capped monthly BNPL integration fee.
- Enterprise Tier: Flat subscription covering unlimited BNPL volume plus premium analytics and SLA guarantees.
This model smooths vendor revenue, incentivises merchant growth, and fosters long-term platform loyalty by tying lower unit costs to higher gross transaction volume.
Consumer late fees versus merchant discount rates
Embedded finance players balance revenue from consumer late fees against the margin pressure merchants face from discount rates.
Models vary by provider:
- Consumer-centric fee model: Lenders impose late fees or interest accruals on missed instalments, while merchants pay minimal or zero fees for BNPL activation. This shifts credit-related risks and revenue to the lender.
- Merchant discount surcharge model: Merchants absorb a higher transaction fee (for example, +0.5–1.5 %) per BNPL sale, while consumers enjoy interest-free plans. This approach can deter some price-sensitive merchants but simplifies compliance and shifts credit risk away from the lending partner.
- Hybrid risk-share agreements: Both merchants and lenders share in late fees and default losses, often proportional to transaction volume and merchant location risk profiles.
Strategic selection of these models depends on merchant willingness to trade margin for conversion lift, and on a provider’s appetite for credit risk versus fee-based revenue.
Consumer Impact and Ethical Considerations
As BNPL and next-gen digital payment solutions become deeply embedded in everyday commerce, their influence on consumer behaviour, financial health, and decision-making has drawn increasing scrutiny. While these tools offer flexibility and convenience, they also introduce risks related to overspending, creditworthiness, and transparency—especially among younger demographics and financially vulnerable populations.
This section examines the broader social and ethical implications of BNPL adoption, focusing on affordability, responsible lending practices, and the user experience design choices that can either support informed decision-making or contribute to financial distress. It highlights the challenges of balancing frictionless interfaces with necessary disclosures, and the evolving expectations of regulators, consumers, and advocacy groups alike.
As the BNPL model matures, addressing these concerns will be critical to ensuring long-term trust and sustainability in digital credit ecosystems.
Affordability, Overspending, and Creditworthiness
Risks of debt stacking and financial illiteracy
One of the most pressing ethical concerns associated with the rise of BNPL and other next-generation digital payment mechanisms is the heightened risk of debt stacking, where consumers take out multiple BNPL loans across various platforms without a consolidated view of their total liabilities. Unlike traditional credit systems, where credit bureau checks and aggregate affordability assessments serve as barriers to overleveraging, many BNPL providers operate in fragmented silos. Each loan is assessed in isolation, creating blind spots for both the lender and the borrower.
This issue is exacerbated by low financial literacy, particularly among digital-native users who may not fully grasp the long-term implications of deferring payments. A 2024 survey from the UK’s Financial Capability Strategy Initiative found that nearly 37% of BNPL users did not realise they were entering into a credit agreement. The simplified language used in marketing, such as ‘Pay in 4’ or ‘Split your purchase’, along with the lack of upfront interest rates or APR disclosures, can mask the underlying financial commitment.
Moreover, since BNPL loans often fall outside the scope of traditional credit reporting (though this is changing in markets like the UK and Australia), consumers may engage in serial borrowing without real-time visibility into cumulative obligations. This can lead to missed payments, snowballing late fees, and eventual financial distress, particularly for those living paycheque to paycheque.
Impact on Gen Z and gig economy populations
The Gen Z demographic, aged roughly 18–28 in 2025, represents the fastest-growing cohort of BNPL users. This segment is more likely to use mobile wallets, shop via social commerce platforms, and prefer interest-free financing options over credit cards, which they often perceive as outdated or punitive. While this shift suggests a democratization of access to credit, it also raises significant concerns.
Gen Z consumers are more prone to impulse spending, as shown by increased cart conversion rates when BNPL is offered. According to Klarna’s own usage data, over 50% of Gen Z users made purchases they would not have otherwise considered, purely because flexible payments were available. This underscores a behavioural vulnerability: BNPL does not just defer cost, it can actively reshape perceptions of affordability.
Similarly, the gig economy workforce, comprising freelancers, delivery riders, and contract workers, often lacks income stability. For them, BNPL serves as a buffer for cash flow mismatches but introduces reliability risks. When income fluctuates week to week, even small repayments become burdensome if not perfectly timed. Since many BNPL providers auto-debit repayments, users risk overdraft charges from their banks, leading to a cascade of financial consequences.
These systemic vulnerabilities suggest that while BNPL increases access, it does not inherently increase affordability. Access to credit must be paired with intelligent design, transparency, and protections to mitigate long-term harm.
Transparency and UX Design Choices
Disclosure practices across BNPL providers
Transparency is central to ethical BNPL design. However, disclosure practices vary widely among providers, with some offering full repayment schedules and late fee warnings upfront, while others bury key terms behind additional clicks or in small print. This inconsistency poses significant risks, especially in jurisdictions where BNPL is not yet classified under conventional credit law.
The most transparent providers incorporate the following features:
- Full cost breakdowns prior to checkout (for example, amount due each month, total repayment, late fees).
- Risk disclosures using plain language, such as ‘This is a credit product, missed payments may affect your credit record’.
- Interactive affordability tools, allowing users to simulate different repayment scenarios.
In contrast, less regulated or opportunistic platforms often frame BNPL as a convenience rather than a financial product. For example, phrases like ‘No credit check needed’ or ‘Instant approval’ may appeal to low-income or subprime consumers, creating a deceptive sense of security. Without clear disclosures, consumers may be unaware that defaulting could lead to debt collection or impact future credit access.
The disparity in disclosure practices highlights the need for harmonised regulations. Some regulators are stepping in:
- The UK Financial Conduct Authority (FCA) now mandates clear labelling of BNPL products as credit agreements.
- The Australian Securities and Investments Commission (ASIC) has called for the same responsible lending obligations as conventional lenders.
- In the United States, the Consumer Financial Protection Bureau (CFPB) has begun pushing for fairer disclosures and consumer data use practices.
Nudge theory in UI: impulse buys versus informed consent
User interface and user experience design choices play a pivotal role in consumer outcomes. Many BNPL providers apply nudge theory principles, subtle behavioural design tactics that influence decision-making, to guide users toward using instalment plans. These can either promote informed consent or encourage impulsive behaviours.
Positive examples of ethical nudging include:
- “Are you sure?” friction screens that prompt users to review affordability before confirming a split-pay plan.
- Spending limit displays, showing how much the user already owes across previous BNPL purchases.
- Post-purchase affordability check-ins, where platforms inquire if upcoming payments still fit within the user’s budget.
However, there are widespread examples of dark patterns in use:
- Pre-selected BNPL options at checkout, subtly pushing users toward financing even when full payment is possible.
- Time-limited offers (for example, ‘Split in 4 for free, today only!’), which exploit FOMO (fear of missing out) to trigger faster decisions.
- Inconsistent language, where one screen mentions ‘zero interest’ but omits potential late fees or penalty charges elsewhere.
In such environments, consent is performative rather than informed. Ethical design requires giving consumers both the information and the time to make reflective choices. That includes consistency in visual hierarchy (for example, placing ‘Pay Now’ and ‘Pay Later’ options on equal footing), transparent repayment reminders, and opt-in rather than opt-out late fee alerts.
Competitive Landscape
The competitive landscape for next-generation digital payments and BNPL solutions is undergoing a marked transformation as the market shifts from rapid expansion to strategic consolidation. With a growing emphasis on profitability, regulatory compliance, and differentiation, both established players and emerging challengers are repositioning their offerings to capture share across embedded finance ecosystems, consumer marketplaces, and merchant platforms.
This section analyses the key participants shaping the market in 2025, ranging from global BNPL leaders and fintech disruptors to incumbent banks and payment networks entering the space. It explores their business models, strategic positioning, and relative strengths, culminating in a Competitive Profile Matrix that offers a comparative view of their capabilities, regional focus, and innovation maturity.
Understanding this competitive fabric is essential for benchmarking performance, identifying partnership opportunities, and anticipating shifts in market leadership over the next three years.
Major Players and Market Positioning
The global BNPL and digital payments ecosystem is undergoing consolidation and diversification as traditional financial institutions, tech platforms, and FinTech disruptors compete for user attention and merchant partnerships.
By 2025, the market has evolved into three core strata: pure-play BNPL providers, embedded tech platforms, and legacy financial institutions moving into instalments.
Klarna, Affirm, Afterpay, PayPal, Apple Pay Later, Amazon Pay Later
Klarna
Once Europe’s BNPL pioneer, Klarna has shifted toward becoming a broader financial super app, offering shopping tools, in-app discounts, and personal finance dashboards. Klarna’s core model remains interest-free short-term loans repaid in four instalments, but it has also introduced longer-term financing (6–36 months) with interest, in partnership with banks. Klarna’s competitive edge lies in its extensive merchant network and UI design focused on Gen Z users.
Affirm
Affirm targets a more premium BNPL segment, offering flexible payment terms of 3 to 36 months with APRs typically ranging from 0% to 30%. Unlike Klarna or Afterpay, Affirm is more selective in underwriting and positions itself as transparent and credit-conscious. Its partnerships with Peloton, Amazon, and Shopify give it both vertical and horizontal reach.
Afterpay (Block Inc)
Afterpay, now a key asset in Block’s ecosystem, maintains a focus on interest-free Pay-in-4 and has scaled operations in Australia, the US, and UK. Its strength lies in seamless merchant integration and a younger customer base. Square POS and Cash App integrations offer it multi-channel reach, enabling a tight link between offline and online commerce.
PayPal
PayPal’s Pay in 4 and Pay Monthly options have bolstered its appeal to existing wallet users. As a global payments leader, its strategy is to embed BNPL functionality within its existing checkout experience. With access to vast consumer and merchant datasets, PayPal leverages internal risk scoring and cross-selling to maintain competitive unit economics.
Apple Pay Later
Launched directly from the iOS ecosystem, Apple Pay Later offers 0% interest instalments through Apple Wallet. The offering is only available in select markets (as of early 2025), but Apple’s control of device, OS, and wallet layer provides unparalleled frictionless integration. The move also aligns with Apple’s push into financial services via Apple Card, Apple Savings, and credit scoring innovations.
Amazon Pay Later
Amazon has partnered with Affirm (in the US) and other regional lenders to offer context-aware BNPL options within checkout. In India and Southeast Asia, Amazon has rolled out its own short-term credit instruments under the ‘Pay Later’ banner, supported by local NBFCs and bank partners. Its advantage lies in native embedding at the point of intent.
Emerging challengers (Zilch, Tabby, Akulaku, Tamara)
While the major players consolidate, regional challengers are rapidly gaining traction through hyperlocalisation, Sharia-compliant features, or embedded commerce functionality.
Zilch (UK/US)
Zilch operates a hybrid model offering both interest-free BNPL and cashback incentives. Its ‘ad-subsidised BNPL’ pitch has resonated with consumers and attracted strategic partners. It issues virtual cards for BNPL use anywhere Mastercard is accepted, giving it a broad merchant footprint.
Tabby (GCC)
Serving the Gulf region, Tabby integrates tightly with regional e-commerce platforms and increasingly with offline PoS. It targets affluent and mid-tier consumers, offering short-term credit with a focus on Arabic-first UX and compliance with Islamic finance principles.
Akulaku (SEA)
In Southeast Asia, Akulaku has built a multi-product financial platform including BNPL, e-wallets, and virtual credit cards. It is often seen as the ‘Ant Financial of SEA’, combining lending with embedded insurance and investment services.
Tamara (Saudi Arabia)
Tamara has grown rapidly in KSA and UAE with 0% BNPL and B2B deferred payment options, benefiting from government support for FinTech innovation. Its Sharia-compliant structure and strong UX localisation have made it a leader in the Middle East BNPL scene.
Banks and card networks (Chase, Amex, Visa Instalments)
Chase, Amex, and Traditional Banks
Major US and UK banks now offer ‘Plan It’-style instalment features that allow cardholders to convert eligible purchases into structured repayment plans. These options are generally post-purchase and interest-bearing, giving traditional players an edge in monetisation, though often lacking in user experience compared to FinTech’s.
Visa Instalments & Mastercard Installments
Card networks have developed BNPL rails at the issuer/acquirer level, enabling banks and merchants to offer instalment plans through their existing infrastructure. These white-label solutions reduce dependence on FinTech providers and allow for network-level standardisation of repayment terms and disclosures.
Business Model Differentiation
Interest-bearing versus 0% BNPL
Providers are split between merchant-funded 0% models (Klarna, Afterpay) and consumer interest-bearing models (Affirm, banks). The former tends to attract higher volume among younger consumers but compresses margins and relies on merchant discount fees. The latter sustains profitability via APRs but faces higher regulatory scrutiny and consumer resistance.
Embedded finance partners versus direct-to-consumer
Embedded BNPL platforms (for example, Stripe, Shopify-integrated BNPL) operate B2B2C models, focusing on merchant enablement and checkout optimisation. In contrast, direct-to-consumer players like Zilch, Akulaku, or Apple Pay Later leverage wallet ecosystems or branded apps, prioritising consumer loyalty and app-based engagement.
Competitive Profile Matrix (2025)
| Player | Region Focus | Business Model | Differentiator | UX Maturity | Risk Management | Merchant Base |
|---|---|---|---|---|---|---|
| Klarna | EU, US, Global | 0% BNPL + interest options | Super app, strong branding | High | Moderate | Broad |
| Affirm | US, CA | Interest-bearing BNPL | Long-term plans, transparency | High | Strong | Medium-high |
| Afterpay | AU, US, UK | 0% BNPL | Square/Cash App integration | High | Moderate | Broad |
| PayPal | Global | BNPL via wallet integration | Scale, loyalty, data synergy | Moderate | Strong | Very broad |
| Apple Pay Later | US (2025), UK | Wallet-embedded 0% BNPL | OS-level integration | Very High | Strong | Closed loop |
| Amazon Pay Later | US, India, SEA | Localised credit partnerships | Point-of-intent embedded BNPL | High | Strong | Closed loop |
| Zilch | UK, US | Cashback + 0% BNPL hybrid | Mastercard compatibility | High | Moderate | Broad |
| Tabby | GCC | 0% BNPL | Arabic-first, Sharia-compliant | Moderate | Moderate | Regional |
| Akulaku | SEA | BNPL + e-wallet suite | Super app model | High | Strong | Regional |
| Tamara | GCC | Sharia-compliant 0% BNPL | Government-backed scale-up | Moderate | Strong | Regional |
| Visa Installments | Global | Network-level infrastructure | Issuer/acquirer partnerships | Low-Med | Strong | Expansive |
| Chase / Amex | US | Card-based instalments | Credit limit integration | Moderate | Strong | Cardholders |
The competitive landscape in BNPL and digital payments continues to evolve along the fault lines of business model architecture, regional regulation, and embedded ecosystem reach. Players that control distribution (for example, Apple, Amazon) are leveraging platform economics, while FinTech innovators drive forward user-centric design and financial inclusivity. Traditional institutions are catching up with infrastructure-focused solutions.
The winners in this space through 2028 will likely be those that can blend trust, compliance, and seamless user experience with monetisation models that scale responsibly across diverse demographics and regulatory environments.
Strategic Outlook: 2025-2028
The next three years will be pivotal for the evolution of next-generation digital payments and Buy Now, Pay Later solutions. As the market matures and competitive dynamics intensify, key stakeholders, including FinTech providers, incumbent lenders, merchants, and platforms, must navigate a rapidly shifting landscape shaped by technological progress, regulatory tightening, and changing consumer expectations.
This section provides a forward-looking analysis of the critical trends and strategic inflection points expected to define the 2025–2028 period.
From the accelerating consolidation of BNPL providers to the rise of embedded finance ecosystems and regulation-led innovation, we examine how the interplay of innovation, compliance, and platform economics will influence business models and market power. Additionally, we explore the implications for stakeholders, offering a decision-making framework that balances speed, scale, and sustainability in the deployment of payment and credit technologies.
By understanding these trajectories, stakeholders can position themselves not only to mitigate risk but to capture emerging opportunities in what is becoming an increasingly integrated and data-driven financial services environment.
Key Trends to Watch
As the digital payments ecosystem evolves through 2025 to 2028, several macro and micro trends are set to redefine the trajectory of next-gen payment solutions and BNPL offerings. These trends extend beyond technology adoption and touch the very fabric of how financial services are integrated, regulated, and consumed.
This section highlights the most significant forces expected to shape the competitive and operational dynamics of the industry. From market consolidation and the rise of embedded finance to regulation-fuelled innovation, each trend presents both opportunities and challenges for players across the value chain. Understanding these developments is essential for stakeholders aiming to build resilient strategies, future-proof their business models, and capture long-term value in a maturing, highly competitive market.
Consolidation of BNPL providers
Between 2025 and 2028, the BNPL landscape will tilt decisively toward consolidation.
As unit economics tighten, borne of competitive merchant discount fees, rising customer acquisition costs and increasingly stringent compliance demands, smaller challengers will struggle to maintain independent scale. We expect to see a wave of mergers and acquisitions: larger FinTech’s and incumbent financial institutions acquiring regional BNPL upstarts to secure market share, expand geographic footprints and harness proprietary underwriting or data-analytics capabilities.
Strategic partnerships will also proliferate, with established card networks and bank-led instalment offerings weaving BNPL into their core consumer propositions. These consolidation dynamics will sharpen the competitive field, concentrating volume among the top five to eight global players while niche and vertical-focused specialists seek exit opportunities or carve out protected sub-markets.
Rise of embedded finance ecosystems
Embedded finance will transition from novelty to ubiquity, as platform-native lending, insurance and wealth tools become integral to every major commerce and service interface. By 2028, it will be commonplace for non-financial digital platforms, whether ride-hailing apps, on-demand healthcare portals or software-as-a-service providers, to offer BNPL alongside subscription billing, micro-insurance or savings products.
This ecosystem approach allows platforms to create holistic financial journeys: for example, a travel marketplace that bundles trip insurance, instalment repayments and FX wallets in a single checkout flow. The winners will be those that master modular API stacks, mixing and matching micro-services from multiple FinTech and banking partners, to deliver seamless, context-aware financial experiences without the friction of redirects or external sign-ups.
Regulation-driven innovation and de-risking
As regulators worldwide bring BNPL under the umbrella of consumer credit statutes, providers will face uniform obligations around affordability assessments, credit reporting and disclosure practices.
Rather than stifle innovation, these rules will incentivise the development of advanced risk-management toolkits: automated affordability engines, embedded credit registries and standardised data-sharing protocols. We anticipate new reg-tech offerings tailored specifically for BNPL compliance, think API-driven dashboards that monitor loan portfolios against evolving jurisdictional requirements in real time.
Concurrently, risk-sharing arrangements between merchants, platforms and lenders will become more sophisticated, balancing default exposure with revenue-sharing incentives. This regulatory evolution will raise the bar for market entry, creating both barriers for under-capitalised startups and opportunities for providers with robust compliance infrastructures.
Implications for Stakeholders
FinTechs and lenders: build or partner decisions
By 2028, FinTech’s and banks will need to make strategic ‘build versus partner’ determinations. Those with deep tech and data-science capabilities may opt to develop in-house BNPL platforms, leveraging proprietary behavioural scoring models and direct merchant integrationas to maximise margins. Conversely, organisations lacking scale or infrastructure will increasingly pursue white-label partnerships or turnkey API solutions from established BNPL specialists.
In either case, the priority will be on agility: the ability to spin up new repayment plans, adapt to nuanced regional regulations and roll out co-branded experiences in weeks rather than months. Lenders will also weigh the merits of vertical specialisation, such as travel-focused credit or healthcare financing, against horizontal aggregation strategies that prioritise broad merchant networks and standardised product suites.
Merchants and marketplaces: cost versus conversion trade-offs
For merchants, the strategic calculus will centre on the trade-off between incremental conversion and incremental cost.
BNPL can boost average order values by 15–30% and reduce cart abandonment, but comes at the price of higher merchant discount rates (MDRs) or referral fees.
By 2028, leading merchants will have migrated beyond one-size-fits-all BNPL solutions to dynamic financing toolkits that present the optimal credit option based on cart size, customer risk profile and profitability thresholds.
Marketplaces, in particular, will adopt revenue-sharing models, whereby they receive a slice of late fees or interchange spread, instead of simply acting as conduits for third-party lenders. This ‘skin in the game’ approach aligns incentives but demands sophisticated analytics to forecast default rates and ensure overall profitability.
Platforms: controlling UX while ensuring compliance
Digital platforms, from e-commerce ecosystems to super-apps, will juggle two imperatives: delivering a frictionless user experience and maintaining strict compliance with local credit laws.
To succeed, platforms will invest in adaptive UX frameworks that surface contextually relevant financing options without overwhelming users. For example, a tiered interface might initially present a ‘Pay in 4’ button for small-ticket items, but switch to ‘3–12 month instalments’ once the cart value crosses a defined threshold.
Simultaneously, platforms will embed compliance guardrails at the API level, automatically triggering affordability checks, identity verifications and disclosure pop-ups in accordance with each jurisdiction’s latest requirements. This unified approach will minimise time-to-market for new credit products, reduce legal risk and preserve brand trust by ensuring transparent, consistent experiences across borders.
Stakeholder Decision Matrix
Below is a detailed stakeholder decision-matrix, mapping out the key strategic choices each group must make, the options available, their pros and cons, and our recommendation for 2025–2028.
| Stakeholder | Decision Context | Option A | Option B | Key Pros of A | Key Pros of B | Recommendation |
|---|---|---|---|---|---|---|
| FinTechs & Lenders | Build vs. Partner | Develop in-house BNPL platform | White-label / API integration with specialist BNPL | Full control of UX, data & marginsLong-term IP value | Faster time-to-marketLower capital / compliance burden | Partner if lacking scale or deep data-science teams; Build only if you have existing credit infrastructure and can invest in compliance tech. |
| FinTechs & Lenders | Vertical Specialisation vs. Horizontal Push | Focus on specific sectors (travel, healthcare, et alia) | Offer a standardised BNPL across all merchant types | Deeper domain expertiseHigher margins in niche markets | Larger addressable marketBetter merchant cross-sell | Hybrid: Start vertical to prove model, then leverage success into horizontal expansion using reusable modules. |
| Merchants & Marketplaces | One-size-fits-all BNPL vs. Dynamic Toolkit | Single BNPL partner for all carts | Multiple credit options selected by cart value / risk | Simpler integration & reconciliation | Optimised margins & conversion per customer segment | Dynamic Toolkit: Use decision-engine to surface the optimal financing option per order size/risk profile. |
| Merchants & Marketplaces | Absorb Cost vs. Pass-through Surcharges | Pay higher MDR for 0% consumer fees | Add small surcharge on BNPL transactions | Full consumer appealNo price signal | Preserves margin if risk or volume spikes | Absorb on premium/high-margin items; Pass-through on commodities or low-margin SKUs. |
| Platforms (e-commerce & super-apps) | Frictionless UX vs. Regulatory Guardrails | Minimise screens / clicks for BNPL checkout | Insert mandatory affordability & disclosure flows | Higher conversion in the short term | Lower compliance risk & higher long-term trust | Balanced: Use contextual micro-nudges (inline APR tooltips) rather than full redirect screens, to blend speed with transparency. |
| Platforms | In-house Risk Engine vs. Third-party Scoring | Build proprietary AI/ML underwriting | Licence third-party open-banking scoring APIs | Tailored algorithmsPotential IP asset | Faster rolloutReg-tech / compliance baked in | Third-party initially for speed, then migrate critical paths in-house as data volumes and expertise grow. |
How to use this matrix
- Assess your capabilities: Match your existing tech, data, and compliance resources against the pros and cons of each option.
- Prioritise agility: Early-stage or resource-constrained players should lean on partnerships and white-label solutions to accelerate adoption.
- Plan for scale: As volume and regulatory complexity grow, transition toward in-house components and dynamic decision-engines to optimise margins and manage risk internally.
This decision-matrix provides a clear framework for each stakeholder to navigate the rapidly evolving digital payments and BNPL landscape through 2028.
