Growth marketing

The risks and rewards of offering BNPL as a lender

November 25, 2025

Eseose Animhiaga

In this post

Buy Now Pay Later has become one of the fastest-growing credit products, and lenders everywhere understand why. Consumers use it with ease, merchants like the lift in conversions, and regulators are watching it closely.

Global usage keeps climbing. Statista’s 2024 figures note that BNPL already accounts for more than 5% of all global ecommerce transactions, and is expected to pass 900 billion dollars in transaction value by 2029. In markets across Africa, adoption continues to expand through retail, travel, electronics, and even healthcare.

Lenders looking to enter this space see an opportunity to grow their portfolio and reach new customer segments. The appeal is real, but so are the risks. BNPL requires strong underwriting, predictable operational processes, disciplined risk limits, and a clear understanding of how returns, defaults, fraud, and regulatory expectations affect the business.

The product may attract a younger, credit-thin audience, and that can make portfolio performance harder to manage if the lender is not fully prepared. This article breaks down both sides of the offering. It explains what lenders stand to gain and what they need to control before expanding into BNPL at scale.

The rewards lenders chase with BNPL

A wider customer base and new borrower profiles

BNPL attracts younger users who want credit access without the long process that comes with traditional loans. In markets like South Africa, Kenya, Ghana, and Morocco, this group already drives most ecommerce activity. Global surveys show a large percentage of Gen Z shoppers have used at least one BNPL service. Since many of these customers have thin or no credit files, BNPL introduces lenders to borrowers they would rarely interact with through regular credit products. This can support growth in new markets and segments, especially when paired with thoughtful limits and reliable affordability checks.

Higher merchant sales and stronger transaction volumes

Merchants usually see a clear increase in order values when they offer installment payments. Some global retailers report jumps of more than 30% in average order value after adding BNPL. Lenders benefit from this momentum because more purchases mean higher transaction-based revenue. Merchants also value any tool that reduces abandoned carts, and BNPL continues to influence that metric.

Extra revenue channels

BNPL can offer lenders several income layers. Merchant fees remain the primary source, and they are often higher than card processing fees. Late fees and voluntary add-ons, like insurance or credit-building features, provide additional income in markets where regulations allow these options. Some lenders also bring customers into broader product ecosystems, from personal loans to savings products.

Better loyalty and visibility for the lender

BNPL introduces the lender at the point of purchase. This gives the lender direct contact with the customer while the buying decision is still fresh. If the service works smoothly and the repayment journey stays predictable, customers return to the lender for future purchases. The product can become an early entry point that deepens brand recognition and sets up long-term relationships.

Lower acquisition costs

Since customers join through merchant channels, lenders often pay less for acquisition. Marketing spends drop, and the lender benefits from the merchant’s own traffic. For new BNPL players in growing African markets, this can be a cost-effective way to build a pipeline.

The risks lenders must control

Higher default exposure

BNPL attracts users with thinner credit profiles. Multiple global studies, including reports from the U.S. CFPB and from UK regulators, show that BNPL users experience delinquency rates that are materially higher than users of traditional credit products. The ease of applying for many installment plans at the same time increases repayment pressure and makes affordability harder to assess. Lenders offering BNPL must prepare for heavier loss rates, tighter monitoring, and real-time scoring models that can detect stress before it becomes full delinquency. Without that level of visibility, credit losses can escalate quickly.

Pressure on profitability

BNPL can look profitable on the surface because merchant fees appear attractive. In practice, the product can become expensive to run after factoring in default rates, customer support, dispute management, fraud controls, and the technology spend required to operate at scale. Global BNPL leaders continue to report thin margins for these reasons. A lender entering the space needs a clear understanding of cost-to-serve and a strong plan for managing operational efficiency.

Regulatory uncertainty

BNPL regulation is becoming more defined, but many countries are still shaping how the rules apply. The UK, the EU, the US, Australia, and several African markets are discussing tighter rules around disclosures, affordability checks, reporting standards, and fee structures. Regulators want to ensure consumer protection, especially as more users rely on short-term credit. Lenders must stay updated and maintain processes that can adjust quickly. Compliance costs can rise as governments refine expectations around transparency, fair treatment, and data management.

Growing customer indebtedness

BNPL encourages multiple purchase cycles. Some consumers carry several BNPL obligations across different lenders at the same time. This pattern makes it difficult for any single lender to understand the full debt load of a customer, especially in markets where BNPL providers do not report to the credit bureaus. This can weaken the lender’s ability to assess repayment capacity and raises the risk of overextension.

Fraud and identity risks

BNPL transactions happen quickly, and many checks run in real time. This creates space for identity theft and synthetic identities. Fraud rings continue to target BNPL because they understand the pace at which approvals take place. Lenders need strong device fingerprinting, ID verification, behavioral checks, and constant monitoring to avoid accumulating losses that have nothing to do with credit risk.

Technical and operational complexity

BNPL requires solid integration between lenders, merchants, payment processors, and customer service tools. When these systems fail, customers experience failed checkouts, incorrect repayments, or slow refunds. Handling returns through multiple systems can also be challenging. The merchant expects the lender to manage the customer cleanly, while the customer expects quick adjustments when an item is returned. If these processes do not run efficiently, the lender risks reputational damage and lost merchant relationships.

Limited visibility into customer obligations

Many providers do not report payment data to credit bureaus. This limits the lender’s understanding of a customer’s full risk profile. It also reduces the data available for credit modeling. A lender that wants to operate responsibly must find ways to gather alternative data, run affordability tests, and build internal checks to detect overstretched customers.

So when does BNPL make sense for a lender?

BNPL can work well when the lender has the right mix of data (traditional and alternative), technology, merchant partnerships, and risk controls. It performs best when underwriting models can update in real time, fraud systems operate with strong identity verification, and repayment tracking stays consistent. Lenders also need to understand the local regulatory environment and prepare for changes that may adjust fee structures and customer disclosure requirements.

Strong customer service matters because repayment disputes and return-related adjustments can shape how customers view the lender. BNPL creates touchpoints long after the purchase is made, and the lender must maintain a steady customer relationship throughout that period.

BNPL can be a valuable product for lenders who want to grow, but it requires discipline, visibility, and an honest evaluation of cost versus reward.

Where lenders go from here

BNPL will keep attracting attention from consumers, merchants, regulators, and lenders, which means the model will continue to shift as markets mature. Lenders that want to participate need a clear view of the risks, dependable credit assessment processes, and a technical stack that can support high transaction volumes without losing sight of profitability.

When these parts work together, BNPL can become a structured product rather than a gamble, especially in markets where digital retail keeps expanding.

For lenders exploring BNPL or looking to refine their current model, Lendsqr provides the tools to assess risk, manage credit decisions, and run operations at scale.

The platform supports onboarding, underwriting, collections, and repayment automation in a way that helps lenders stay focused on growth. If you are considering launching or optimising BNPL, Lendsqr can give you the foundation you need to operate with confidence. Start here.